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Speaker 1: Why energy is the biggest investment opportunity that we have today. Now,

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Speaker 1: price is easy, it's easy. You break it down with

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Speaker 1: supply and demand, and we're looking for a mismatch in

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Speaker 1: supply demand. That's our edge, and we are seeing one

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Speaker 1: of the greatest mismatches in supply demand that we've ever

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Speaker 1: seen man made. If you will, now, I've been talking

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Speaker 1: about energy. I've been talking about the world going into

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Speaker 1: an energy crisis for over two years. Um, I've been

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Speaker 1: breaking it down for you. But I am sitting down

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Speaker 1: with one of the energy industry's biggest experts, Josh Young.

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Speaker 1: We're gonna sit down, We're gonna talk about the supply demand.

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Speaker 1: We're gonna break down all the supply of energy that

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Speaker 1: we have and make a case why there's no more

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Speaker 1: coming at least anytime soon. Then we're gonna go through

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Speaker 1: all the demand side so you can understand exactly how

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Speaker 1: big this mismatch is. Of course, then we are going

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Speaker 1: to get into how to play it, how to position,

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Speaker 1: what type of companies you should be looking for, what

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Speaker 1: type of multiples, what type of sectors, and so much more.

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Speaker 1: It's a complete playbook what you should expect from energy

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Speaker 1: moving forward supplying demand and how to play it. You

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Speaker 1: do not want to miss this interview with Josh Young.

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Speaker 1: It was an amazing interview. I learned a lot. Get

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Speaker 1: out your pen and paper. Now let's go all right, Josh,

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Speaker 1: here we are. Thanks for joining me today. I'm excited

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Speaker 1: to jump into this. Thank you. So uh yeah, we're

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Speaker 1: just talking about our mutual friend Coupy that got us connected.

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Speaker 1: So shout out to him. If you're not following him,

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Speaker 1: you should check him out on Twitter at a cuppy.

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Speaker 1: I guess that's his handle. I didn't look it up,

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Speaker 1: but you're you're the the the energy guy, right, the oil,

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Speaker 1: the natural gas guy. I that's where I saw him

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Speaker 1: talking about you a lot, and so I'm excited to

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Speaker 1: dig into that. UM today it's obviously a hot topic. UM.

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Speaker 1: I want to talk about this from I was kind

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Speaker 1: of thinking about talking about from two sides, right, supply

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Speaker 1: and demand, and there's things that affect the supply, there's

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Speaker 1: things that talk about that that that affect the demand.

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Speaker 1: But first let's talk about here we are at the

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Speaker 1: time with this recording, just going into the mid term

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Speaker 1: elections here in the United States, which is a pretty

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Speaker 1: big deal. Potentially a really big election. We'll see what happens.

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Speaker 1: But um, we're at going into this election where we

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Speaker 1: have you know, inflation is the hot butt button issue here. Um,

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Speaker 1: it seems like energy has been driving the inflation and

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Speaker 1: we have the Biden, well, we have Biden himself. I'm

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Speaker 1: not gonna say the ADMIN. But Biden himself and the

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Speaker 1: rhetoric that he has, the talk that he's has, it

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Speaker 1: almost seems like he's angling for some sort of a

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Speaker 1: nationalization of the energy industry. Not to jump right into

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Speaker 1: the politics of it, but are you picking up on that.

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Speaker 1: Do you think that's kind of what's happening here or

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Speaker 1: is it just like trying to point the blame, deflect

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Speaker 1: blame for the mid terms, to maybe say that, you know,

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Speaker 1: it's not my fault. White energy so high. Yeah, I

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Speaker 1: think I think it would be shocking if the US

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Speaker 1: nationalized oil and gas producers. So I don't think. I'm

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Speaker 1: not sure what he's doing exactly, And it does seems

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Speaker 1: sort of like he has different speechwriters and different policy

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Speaker 1: analysts who are pushing him in sort of opposite directions.

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Speaker 1: So it's like, we're gonna shut down fossil fuel companies

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Speaker 1: and oil companies are price gouging produce more right now.

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Speaker 1: So there's there's a very obvious sort of conflict there.

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Speaker 1: But I don't I don't come to the nationalization angle

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Speaker 1: or aspect, and you know that hasn't happened in the

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Speaker 1: US h in any industry in a long time. And

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Speaker 1: I think it would be I think other than from

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Speaker 1: the far left for certain industries and the far right

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Speaker 1: for other industries, I think it would be shocking and

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Speaker 1: and not acceptable to the broad um to the broad

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Speaker 1: voter base into the the country to to nationalize and

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Speaker 1: industry like energy. So you've seen I think it was

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Speaker 1: just this week a lot of DIM lawmakers have come

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Speaker 1: out calling for it. UM I made a video on

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Speaker 1: my channel talking about, you know, the diesel situation, and

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Speaker 1: I was completely shocked by the amount of comments, I

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Speaker 1: mean from my audience, who typically wouldn't be from that

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Speaker 1: side of the aisle. I was shocked at the amount

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Speaker 1: of comments of people saying, that's why we need to nationalize, that,

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Speaker 1: that's why I need to nationalize. So we had demn

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Speaker 1: lawmakers come out and talk about it. There's some growing consensus,

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Speaker 1: I think because of this rhetoric of the posting these

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Speaker 1: record profits. I agree at the uphill battle, but um,

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Speaker 1: so it's not anywhere on your radar. You don't see

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Speaker 1: that as a potential risk out there. I think it's

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Speaker 1: very unlikely that That reminds me of the discussion um

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Speaker 1: pre Russian invasion of Ukraine. But but right around it, um,

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Speaker 1: there was some discussion of a potential oil export band

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Speaker 1: and um, you know, there were a few sort of

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Speaker 1: famous analysts and market commenters who were starting to talk

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Speaker 1: about it and predicting it as a likely outcome. And

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Speaker 1: they're just there are some logistical and um, sort of

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Speaker 1: international relations aspects to that that made it very unfeasible.

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Speaker 1: And in a similar way U nationalization expropriation of oil

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Speaker 1: and gas assets. It just it just doesn't when you

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Speaker 1: think about it for a minute, right, you hear it,

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Speaker 1: and it's shocking, but it just doesn't work, right, like

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Speaker 1: what you're gonna have federal employees run oil fields? Um,

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Speaker 1: I mean, it just doesn't. You know, federal employees struggle

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Speaker 1: enough with law enforcement and struggle enough with administration of

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Speaker 1: programs that sort of run themselves. Um. And you look

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Speaker 1: at how the t s A works and how much

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Speaker 1: they had to outsource from that, and and again like

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Speaker 1: just how simple and small that task is, right, preventing

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Speaker 1: weapons and explosives from going on planes, That's it's a

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Speaker 1: very small task. Uh. Exploring for delineating, developing and the

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Speaker 1: maintaining production of oil and gas fields is an enormous

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Speaker 1: task that is well beyond the means of and well

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Speaker 1: beyond anything that the federal government does. And there's a

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Speaker 1: reason why, UH, naturalizations tend to fail, and they're the

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Speaker 1: reason why the US has privatized almost everything and kept

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Speaker 1: things private for for decades now. Of course I agree

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Speaker 1: with you a hundred percent. And of course I agree

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Speaker 1: that it would be a complete disaster, and we can

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Speaker 1: just look at Venezuela's see how that would turn out. Right,

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Speaker 1: They're not competent to run this, and so I would

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Speaker 1: agree with you. UM doesn't mean they don't want to try,

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Speaker 1: but just you know, when we're looking at you know, investing, UM,

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Speaker 1: I typically think of longer term period. So I'm just

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Speaker 1: trying to kind of think of like potential risks and

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Speaker 1: stuff like that. So I thought that's a hot button issue.

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Speaker 1: We talked about that. But if we if we look

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Speaker 1: at this, and I guess like, frame this up. So

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Speaker 1: you have Bison Interest. Um, that's a fund that focuses

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Speaker 1: on the energy sector, is that right? Yeah? And so, um,

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Speaker 1: do you is your fun kind of positioned long term?

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Speaker 1: Are you looking to three or four years out? Are

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Speaker 1: you kind of doing short term trades or kind of

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Speaker 1: like what's the thesis or the view of that fund? Yeah?

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Speaker 1: And importantly, none of this is an offer or a solicitation. Yeah, sorry,

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Speaker 1: of course, And and not there are no investment recommendations,

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Speaker 1: and anyone hearing anything on this should consult their own

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Speaker 1: investment advisor. Uh, sort of investments. Um. But uh, so

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Speaker 1: we launched Bison in and so slightly long answer to

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Speaker 1: a short question, but I think it addresses it sort

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Speaker 1: of more fully. Um, we launched Bison in because the

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Speaker 1: price of oil fell dramatically from the highs of I

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Speaker 1: think roughly a hundred and twenty dollars of barrel down

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Speaker 1: to the low and early if I think it was

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Speaker 1: around twenty nine of barrel. And so, uh, large cap

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Speaker 1: oil and gas stocks were down about fifty percent in

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Speaker 1: that time, and small caps were down about eight percent

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Speaker 1: in that time. And so our thought was that over

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Speaker 1: a multi year period, Um, that sort of rerating would

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Speaker 1: lead to oil and gas stocks recovering, and maybe they

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Speaker 1: wouldn't recover fully, but if you're down eighty percent, if

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Speaker 1: you get back to only down, let's say you could

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Speaker 1: double or more. And so UM, there was really this

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Speaker 1: interesting opportunity and the thought was that it would be

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Speaker 1: a pain trade where we'd owned things and buy them

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Speaker 1: cheap that were well run and well underwritten and unlikely

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Speaker 1: to go bankrupt, and if they went down, we'd buy more.

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Speaker 1: And eventually, UM, the reduction and supply from the stocks

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Speaker 1: being down, which meant the cost of capital for the

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Speaker 1: businesses their availability to reinvest was down. Um. Eventually that

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Speaker 1: would lead to higher prices and higher share prices. So

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Speaker 1: we thought it would take two or three years, and

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Speaker 1: so far it's taken seven, and UM, I think I

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Speaker 1: think that should continue to play out of the next

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Speaker 1: number of years. It taking longer meant that this downturn

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Speaker 1: obviously was more extreme, but that also means that the

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Speaker 1: under supply of oil and gas is more extreme, which

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Speaker 1: should lead to much higher prices as well as it

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Speaker 1: taking a lot longer for the supply base to recover.

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Speaker 1: So yeah, we're we're very long term oriented, but but

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Speaker 1: not sort of forever married to this in the sense

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Speaker 1: that you know, there's likely to be a point where

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Speaker 1: oil becomes adequately supplied and then eventually oversupplied, and so

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Speaker 1: we're we're here for this undersupply situation transitioning to sort

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Speaker 1: of closer to normal supply, and at that point we

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Speaker 1: we likely sell them return count. Yeah great, Yeah, I

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Speaker 1: just like to clarify that because a lot of times

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Speaker 1: I when we talk to people, I always want to

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Speaker 1: try to clarify, like what time periods we're looking at,

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Speaker 1: because a lot of times, like I had two bond

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Speaker 1: guys on bonds are the worst thing in the world,

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Speaker 1: bonds are the best thing in the world, and then

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Speaker 1: they disagree. But when you talk to him, it's like, well,

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Speaker 1: what time frames we and then there's more agreement there.

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Speaker 1: But so if we jump into this, let's let's talk

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Speaker 1: about some of this supply and demand. If we start

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Speaker 1: on the supply side, Um, we have Opeque, right, which

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Speaker 1: is a big piece of that supply. Um, we have

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Speaker 1: g seven nations now calling for them to produce more oil.

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Speaker 1: We know Biden went over there Supposedly it wasn't to

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Speaker 1: talk about oil, but UM, we think it probab it was.

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Speaker 1: I guess let's start with, um, the spare capacity. I

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Speaker 1: know something that you talked about. What do you think

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Speaker 1: if their possibility is to really expand the amount of

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Speaker 1: oil they're producing. It's funny. I just gave a speech

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Speaker 1: at a local law school here in Houston actually last

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Speaker 1: night about this. UH. It was interesting sort of going

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Speaker 1: through the history of claims about opeque capacity and actually

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Speaker 1: behind me I have the Matt Simmons Twilight in the

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Speaker 1: Desert Book, which was I think one of the original

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Speaker 1: popular claims about Saudi Arabia potentially running out or having

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Speaker 1: much smaller reserves than they were claiming. UM. So what

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Speaker 1: we realized last summer was so a year and a

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Speaker 1: half ago roughly, was that UH, Saudi and others were

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Speaker 1: not reinvesting sufficiently to likely be able to sustain their

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Speaker 1: projected production levels. And so UM that meant essentially that

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Speaker 1: they were overstating their spare capacity and likely also overstating

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Speaker 1: their ability to grow their production over the medium term.

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Speaker 1: So I wouldn't say that Saudi Arabia is out of oil,

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Speaker 1: or that Russia is out of oil, or that various

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Speaker 1: other opaqu or OPEC plus countries are out. I think

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Speaker 1: it's less about that and more about there being a

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Speaker 1: capital cycle that's necessary in those countries to be able

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Speaker 1: to get to the level of production they claim they

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Speaker 1: can get to, and then to be able to grow

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Speaker 1: more than that to be able to meet likely demand

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Speaker 1: over time. So I think it's sort of the spirit

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Speaker 1: capacity issue is about what can you bring on in

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Speaker 1: the next month that can stay on for six months.

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Speaker 1: And then there's another issue which Matt Simmons addressed, which

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Speaker 1: was are they out? Like are they are they tapped out?

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Speaker 1: Are they done? And it's they're both complicated questions, but

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Speaker 1: I think it's important to distinguish between the two. I'm

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Speaker 1: not necessarily a peak oil proponent. I'm more of a

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Speaker 1: peak cheap oil component proponent. So I think there's there's

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Speaker 1: oil out there to be found and to be developed

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Speaker 1: and be proud produced. But it requires a lot of time,

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Speaker 1: it requires expertise, and it requires capital. And after a

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Speaker 1: long time of starvation of those things, and after a

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Speaker 1: lot of qualified people, talented people have left the industry

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Speaker 1: and with very few coming back in UM, you know,

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Speaker 1: there is this period that we're in that's similar to

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Speaker 1: prior periods after long downturns where it's going to take

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Speaker 1: a lot potentially to get the activity necessary to get

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Speaker 1: the production that we need from these countries. So it's

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Speaker 1: not this peak energy like we, like the whole world

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Speaker 1: was operating on that they can probably bring more on,

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Speaker 1: but it takes an additional capex investment and it's going

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Speaker 1: to take time. How much time does that take. Let's

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Speaker 1: say that they said eight uh g seven, you're asking

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Speaker 1: us to produce more oil. Okay, we'll do it. We

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Speaker 1: need to invest money, we have the money we need.

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Speaker 1: Is this five years? Is a seven years? Yeah? So

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Speaker 1: it depends on the kind of field, but anywhere between

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Speaker 1: three and possibly ten years, and maybe even I saw

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Speaker 1: one estimate of twelve years, which also actually it might

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Speaker 1: sound like a lot that it makes sense. So if

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Speaker 1: you think about the typical offshore field UM, an offshore

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Speaker 1: field that doesn't have infrastructure built to it, a new discovery,

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Speaker 1: a new field UM can take up to twelve years

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Speaker 1: from having that as an idea to you know, running

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Speaker 1: the seismic So you you run a boat with a

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Speaker 1: bunch of seismic measurement devices behind it and it drops explosives,

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Speaker 1: and it sort of measures this the using essentially seismic measurements.

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Speaker 1: It sort of maps what what's down there from a

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Speaker 1: resource perspective as well as sort of what the rock

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Speaker 1: structure looks like. And then with that done, you identify

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Speaker 1: specific drilling targets and then bring in a drill ship

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Speaker 1: to drill an initial exploratory well, and then that's evaluated

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Speaker 1: and tested and studied, and then additional delineation wells if

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Speaker 1: there's a big discovery, or drill to sort of map

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Speaker 1: out the size of the prize, and then development wells

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Speaker 1: are drilled and production facilities are installed. So again, all

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Speaker 1: of these things, I mean, each one of those steps

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Speaker 1: could take a year or more between deciding you want

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Speaker 1: the rig, hiring it, moving it there, having it drill

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Speaker 1: the well, and then testing and then you know the

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Speaker 1: next step. So so conceivably some of the discoveries like

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Speaker 1: this offshore and maybe a discovery that total just achieved

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Speaker 1: earlier this year, that could take ten to twelve years

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Speaker 1: to go from that initial discovery well. Maybe because they

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Speaker 1: already drilled the initial well, maybe it's eight years, but

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Speaker 1: it may take a long time to get from that

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Speaker 1: initial discovery to substantial production from that field. Uh, the

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Speaker 1: Guiana stuff started in so here we are in two

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Speaker 1: We know, it's a huge field and productions just starting

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Speaker 1: to come on. Uh. You know, I think Hessen and

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Speaker 1: Excellent combined, I think they're producing five minute thousand barrels

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Speaker 1: a day or something from there. That will eventually be

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Speaker 1: three million barrels a day, but that's gonna be over

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Speaker 1: the next five to ten years. Let's say that they'll

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Speaker 1: get up to that um and when you look at

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Speaker 1: the amount of declines worldwide, you really need to be

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Speaker 1: adding guiana a year and we're not, and so um

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Speaker 1: so yeah, it could take a long time to get

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Speaker 1: that supply on and it's going to take a lot

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Speaker 1: of capital, and a lot of that capital isn't even

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Speaker 1: being dedicated to it yet. So I like to say

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Speaker 1: the clock it hasn't even really started yet in terms

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Speaker 1: of that. You know, let's a three to twelve years

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Speaker 1: to be able to get substantially more production online. Yeah,

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Speaker 1: I mean, like you were just talking about, there's seven

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Speaker 1: years in and they're barely at five barrel to day

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Speaker 1: or whatever, right, So, uh, it's a long time. Well,

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Speaker 1: I want to come back to that cap X piece

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Speaker 1: in a minute. But let's keep going down the line

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Speaker 1: on some of these supply issues. So with OPEC, there's

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Speaker 1: probably not gonna be able to rapidly expand to their

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Speaker 1: production at least for a number of years. So not

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Speaker 1: a new a lot of new supply coming there. Yeah,

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Speaker 1: that's right. And then I mean there's some complexity there, right,

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Speaker 1: So some productions offline because of sanctions or because of

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Speaker 1: local unrest. Uh, some of it's may be going to

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Speaker 1: come online because Saudi Arabia, for example, is ramping up

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Speaker 1: local gas shale production and that might be burned and

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Speaker 1: offsetting some local consumption of oil. So there could be

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Speaker 1: some small amounts of incremental production. But to really move

303
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Speaker 1: the needle, I think you need a lot more investment

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Speaker 1: in a lot of time. Even in Russia. Right, if

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Speaker 1: if peace broke out, which I would love, right, I mean,

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Speaker 1: they would be wonderful for people to stop dying in Ukraine.

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Speaker 1: But if peace were to break out, it may take

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Speaker 1: several years just to re engineer and fix some of

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Speaker 1: the likely problems that have already occurred in Russian oil fields.

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Speaker 1: And so that then the clocks ticking there were the

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Speaker 1: longer they don't have access to Western services. The less

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Speaker 1: they're reinvesting into their fields longer it's going to take

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Speaker 1: for them to be able to bring fields back on

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Speaker 1: and to be able to get them back up to

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Speaker 1: the production levels that they were at before the war. Yeah,

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Speaker 1: let's talk about the Russian oil fields for a minute. Um,

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Speaker 1: you have on one side, you have Peter's Ion saying

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Speaker 1: that if they don't get this oil on the ground,

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Speaker 1: it's going to back up to the wellheads have to

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Speaker 1: shut them in. Once they shut him in, it could

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Speaker 1: take twenty years to open them back up. Um. Then

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Speaker 1: you have the perma frost and all these other issues. Um.

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Speaker 1: I've talked to Doomberg about it, and he says, he said,

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Speaker 1: you know, Zion says that they don't have the manpower,

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Speaker 1: the technical ability to do that. Um, the big service

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Speaker 1: companies have left. UM. Doomberg's like, come on, you don't

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Speaker 1: think there's other people in the world and how to

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Speaker 1: service it. That's absolutely not a risk. And sorry if

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Speaker 1: I'm putting either all those in the wrong and the

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Speaker 1: wrong statement, I guess where do you fit on that?

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Speaker 1: I guess you're saying you're already starting to see some

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Speaker 1: of that happening in Russia. Yeah, so I think I'm

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Speaker 1: somewhere in the middle there, and I like in respect

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Speaker 1: both of them, and they have expert views in some

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Speaker 1: things UH that that I wouldn't even dream of arguing

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Speaker 1: with that. This I'll argue with a little bit because

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Speaker 1: I have studied it and connected with a number of

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Speaker 1: people that have been actually active in these fields and

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Speaker 1: in analogous fields. And UM, I don't think the sort

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Speaker 1: of perma frost extreme oil product auction collapse scenario is

341
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Speaker 1: very likely at all. UM, But we're already seeing productions

342
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Speaker 1: start to fall off, and so what I would point

343
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Speaker 1: to is less production collapsing and more that production in

344
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Speaker 1: Russia was already declining quite rapidly and required significant reinvestment

345
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Speaker 1: in order to bring on new production to replace production

346
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Speaker 1: that was declining. And the new production that was coming

347
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Speaker 1: on and was very technically challenging and demanding, and so

348
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Speaker 1: without access to the latest and greatest Western technology and

349
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Speaker 1: UH service providers, UM, they're they're not achieving the same

350
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Speaker 1: efficiencies and they're not achieving the same production levels. So

351
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Speaker 1: it's less about collapse and more about what we've seen

352
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Speaker 1: in other fields and in other places where similar sorts

353
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Speaker 1: of things have happened, even without as extreme sanctions. So again,

354
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Speaker 1: you look at Venezuela, you look at Mexico. You know,

355
00:18:54,840 --> 00:18:59,080
Speaker 1: not huge changes. And still you know, when you nationalize,

356
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Speaker 1: you kick out for services companies, you don't necessarily see

357
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Speaker 1: your production fall off day one, but over a few years.

358
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Speaker 1: I mean Cantarell, I think it went from two million

359
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Speaker 1: barrels a day if I were in a thousand barrels

360
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Speaker 1: a day over eight or some so your period. So

361
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Speaker 1: you know, there there is that significant progression. And if

362
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Speaker 1: you're starting with Russian oil production, let's say around eleven

363
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Speaker 1: million barrels a day, maybe you're at ten now and

364
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Speaker 1: maybe you get to eight over the next couple of years.

365
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Speaker 1: It's not it's not the sudden collapse. It's not this

366
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Speaker 1: backing up process. I mean, they certainly have the people

367
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Speaker 1: to be able to restrict production from existing wells, Like

368
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Speaker 1: I would not argue with that. I think it's just

369
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Speaker 1: a question of sort of what does their development look

370
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Speaker 1: like over time, and then what does their maintenance, what

371
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Speaker 1: are their workovers, what are some of their other activities

372
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Speaker 1: look like over time? So I think I'm somewhere in

373
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Speaker 1: the middle on that, and again there's already evidence of

374
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Speaker 1: production already starting to roll over in Russia, but I

375
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Speaker 1: just wouldn't expect it. It would be very surprising if

376
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Speaker 1: Russia was able to continue to produce at the levels

377
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Speaker 1: they were producing right before of the war. It would

378
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Speaker 1: also be surprising if they were producing three million barrels

379
00:20:03,800 --> 00:20:08,080
Speaker 1: a day let's say, using Peter Jahan's number UH around

380
00:20:08,240 --> 00:20:10,200
Speaker 1: one year after the start of the war. So again

381
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Speaker 1: somewhere in the middle, maybe it's a million, maybe it's

382
00:20:12,200 --> 00:20:14,600
Speaker 1: two million barrels a day, but again less of a

383
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Speaker 1: collapse and more of just reduced ability to replace UH

384
00:20:19,520 --> 00:20:25,160
Speaker 1: production that that naturally declines if if peace isn't um,

385
00:20:25,200 --> 00:20:29,280
Speaker 1: it isn't found soon, and we go into this multipolar world, UM,

386
00:20:29,359 --> 00:20:32,240
Speaker 1: where you know, we have you know whatever the bricks

387
00:20:32,280 --> 00:20:34,400
Speaker 1: nations on one side and the NATO nations on the other.

388
00:20:34,440 --> 00:20:38,479
Speaker 1: For example, UM, do you think this decline in Russian

389
00:20:38,520 --> 00:20:42,320
Speaker 1: capacity will continue to continue and continue go down without

390
00:20:42,359 --> 00:20:47,720
Speaker 1: access to the expertise of the people on the NATO side. Yeah,

391
00:20:47,800 --> 00:20:50,479
Speaker 1: I think I think it's a real issue. Um. And

392
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Speaker 1: for every person that says, oh, there's there's plentiful let's

393
00:20:53,840 --> 00:20:58,879
Speaker 1: say Chinese lfs, right that services expertise in technology. I

394
00:20:58,880 --> 00:21:02,679
Speaker 1: would point them to uh oil fields in Mongolia and

395
00:21:02,840 --> 00:21:06,160
Speaker 1: inner Mongolia in various other places where those service providers

396
00:21:06,200 --> 00:21:09,320
Speaker 1: are active. And I mean, it's one of those things

397
00:21:09,320 --> 00:21:11,840
Speaker 1: that really bothers me about the US and sort of

398
00:21:11,840 --> 00:21:15,720
Speaker 1: Western environmental movement, where I know what's happening in those fields.

399
00:21:15,720 --> 00:21:18,280
Speaker 1: I've seen pictures. They're not mine, so I can't share

400
00:21:18,320 --> 00:21:22,680
Speaker 1: them publicly, but it's it's horrible that there's environmental absolute

401
00:21:22,720 --> 00:21:25,720
Speaker 1: catastrophes going on in those fields. Um. And there's no

402
00:21:25,800 --> 00:21:29,720
Speaker 1: protein mongolia Mongolia, yeah, Mongolia in various other places. I

403
00:21:29,720 --> 00:21:31,960
Speaker 1: mean's just right horrible, right. And they're producing let's say

404
00:21:31,960 --> 00:21:35,840
Speaker 1: twenty of their production capacity, um. But they consider it

405
00:21:35,880 --> 00:21:38,280
Speaker 1: great because if they went from zero to two thousand

406
00:21:38,280 --> 00:21:41,080
Speaker 1: barrels a day in the field, that's wonderful from their perspective.

407
00:21:41,160 --> 00:21:43,679
Speaker 1: Even if the production capacity might be a million barrels

408
00:21:43,680 --> 00:21:46,440
Speaker 1: a day, if you look at the extra cost and

409
00:21:46,520 --> 00:21:48,720
Speaker 1: the time and who they have to bring in, if

410
00:21:48,760 --> 00:21:51,120
Speaker 1: none of those are appealing, then maybe they don't make

411
00:21:51,160 --> 00:21:55,920
Speaker 1: those investments. And so bringing those service providers to Russian

412
00:21:55,960 --> 00:21:59,680
Speaker 1: fields that have been actually very well operated like Stockland

413
00:21:59,720 --> 00:22:03,359
Speaker 1: and so on. I mean, you could really see substantially

414
00:22:03,440 --> 00:22:07,520
Speaker 1: lower production relative to what people are forecasting. And frankly,

415
00:22:07,840 --> 00:22:11,600
Speaker 1: I think I think Putin knows this because what he

416
00:22:11,720 --> 00:22:16,679
Speaker 1: stepped into, um in terms of how disastrously the USSR

417
00:22:16,760 --> 00:22:20,720
Speaker 1: was running their fields pre um you know, pre reopening

418
00:22:21,680 --> 00:22:24,359
Speaker 1: of Russia. I mean it was it was pretty bad

419
00:22:24,840 --> 00:22:26,600
Speaker 1: in terms of how they used to develop their their

420
00:22:26,640 --> 00:22:28,879
Speaker 1: old fields as well. So you know, I don't think,

421
00:22:29,359 --> 00:22:32,000
Speaker 1: I don't think that the Chinese services companies are the

422
00:22:32,440 --> 00:22:34,200
Speaker 1: ones you want to go to to be able to

423
00:22:34,240 --> 00:22:36,959
Speaker 1: sustain production. And you know, I think I think there

424
00:22:36,960 --> 00:22:39,399
Speaker 1: are real issues. Again that being said, it's not like

425
00:22:39,440 --> 00:22:42,840
Speaker 1: they can't bring production on. It's just likely to be wasteful,

426
00:22:43,280 --> 00:22:46,720
Speaker 1: likely to be less productive, and likely to take longer.

427
00:22:48,200 --> 00:22:51,439
Speaker 1: Yeah yeah, good, Yeah. I think most people would realize

428
00:22:51,480 --> 00:22:55,800
Speaker 1: that the Chinese are well, we won't get into that. Um, okay,

429
00:22:56,040 --> 00:22:58,119
Speaker 1: let's keep going down the line. Then on the supply side,

430
00:22:58,160 --> 00:23:05,359
Speaker 1: So then, UM, we have you mentioned Venezuela, so or

431
00:23:05,400 --> 00:23:07,280
Speaker 1: we we talked about Venezuela. I guess when we were

432
00:23:07,280 --> 00:23:11,480
Speaker 1: talking about the nationalization so Venezuela. Um, but arguably some

433
00:23:11,560 --> 00:23:14,320
Speaker 1: of maybe one of if not the biggest oil reserves

434
00:23:14,359 --> 00:23:16,280
Speaker 1: in the world. They used to be a major oil

435
00:23:16,359 --> 00:23:20,760
Speaker 1: producer nation through some nationalization process. Maybe if we have

436
00:23:20,800 --> 00:23:23,840
Speaker 1: that political picture right, Um, they've declined now, they can't

437
00:23:23,840 --> 00:23:26,240
Speaker 1: seem to get oil out of the ground. Um. It

438
00:23:26,320 --> 00:23:30,120
Speaker 1: seems like that the reality of them bringing those large

439
00:23:30,119 --> 00:23:33,080
Speaker 1: oil fields back online is not very strong. They don't

440
00:23:33,119 --> 00:23:34,760
Speaker 1: have access to the capex, they don't have access to

441
00:23:34,840 --> 00:23:38,840
Speaker 1: the people. What's your thoughts there? Yeah, again, I think

442
00:23:38,840 --> 00:23:42,200
Speaker 1: it's one of these really weird political things where we're

443
00:23:42,840 --> 00:23:48,760
Speaker 1: very pro certain elections oddly, um, you know America or

444
00:23:48,800 --> 00:23:52,280
Speaker 1: current leadership and other Western nations are, and we're very

445
00:23:52,320 --> 00:23:55,080
Speaker 1: anti other election results, and so we did a very

446
00:23:55,119 --> 00:23:59,000
Speaker 1: poor job of supporting the person who actually won the

447
00:23:59,119 --> 00:24:02,800
Speaker 1: last election in Venezuela. Um. So it's a very complicated

448
00:24:02,840 --> 00:24:08,000
Speaker 1: political situation there. Um. And there's also a very complicated

449
00:24:08,520 --> 00:24:13,240
Speaker 1: labor situation and equipment situation and compensation for services provided.

450
00:24:13,600 --> 00:24:17,200
Speaker 1: And so production has increased a little bit in Venezuela,

451
00:24:17,240 --> 00:24:22,199
Speaker 1: but there's also many, many problems and obstacles that prevent

452
00:24:22,280 --> 00:24:25,640
Speaker 1: production from rising much more than than we've seen and

453
00:24:25,720 --> 00:24:28,960
Speaker 1: in a situation so so I'm I'm an optimist, and

454
00:24:29,160 --> 00:24:33,159
Speaker 1: I think that things in general are better when everyone wins.

455
00:24:33,480 --> 00:24:36,879
Speaker 1: So I actually would be very much in favor of

456
00:24:36,960 --> 00:24:40,280
Speaker 1: and very happy to see if tomorrow Muduro's regime fell

457
00:24:40,840 --> 00:24:46,200
Speaker 1: and Venezuela was run by um, you know, capitalists who

458
00:24:46,240 --> 00:24:49,040
Speaker 1: wanted to grow their economy and reopen it and and

459
00:24:49,119 --> 00:24:52,159
Speaker 1: redevelop it. And there would be some production that would

460
00:24:52,200 --> 00:24:54,679
Speaker 1: come on over the course of let's say five years

461
00:24:54,680 --> 00:24:57,320
Speaker 1: from them, but there's not very much more oil production

462
00:24:57,359 --> 00:25:00,000
Speaker 1: that would come on over the first let's say twenty

463
00:25:00,040 --> 00:25:02,000
Speaker 1: four to thirty six months. There's lots of issues with

464
00:25:02,040 --> 00:25:04,800
Speaker 1: their infrastructure. There's lots of stuff that's been cannibalized. It

465
00:25:04,840 --> 00:25:06,920
Speaker 1: would take a while to capitalize it, and it would

466
00:25:06,920 --> 00:25:10,880
Speaker 1: take a while to actually get sufficient investment and development done.

467
00:25:11,200 --> 00:25:13,399
Speaker 1: And what everyone forgets, I think, so they forget this

468
00:25:13,440 --> 00:25:17,760
Speaker 1: about Iran to um it would be wonderful both from

469
00:25:18,040 --> 00:25:21,360
Speaker 1: a Venezuela perspective and in Iran perspective for oil demand

470
00:25:21,760 --> 00:25:25,320
Speaker 1: if these countries were reopened and if they were able

471
00:25:25,359 --> 00:25:28,679
Speaker 1: to sort of have their economies revitalize, and when you

472
00:25:28,720 --> 00:25:31,960
Speaker 1: look at the likely production versus likely consumption, both in

473
00:25:32,080 --> 00:25:36,080
Speaker 1: Venezuela and in Iran, it would take probably until about

474
00:25:36,160 --> 00:25:39,600
Speaker 1: five years in before they'd be able to produce more

475
00:25:39,880 --> 00:25:43,119
Speaker 1: than their incremental consumption from the reopening. And again just

476
00:25:43,200 --> 00:25:45,919
Speaker 1: in terms of total human suffering and total like the

477
00:25:45,920 --> 00:25:47,880
Speaker 1: world being a better place, it would be a much

478
00:25:47,880 --> 00:25:52,000
Speaker 1: better place if there were more sort of classically liberal

479
00:25:52,040 --> 00:25:56,639
Speaker 1: regimes running those countries. Yeah, and I certainly agree with that. Um,

480
00:25:56,640 --> 00:25:59,600
Speaker 1: it's a big if, right, if the Madua regime could

481
00:25:59,600 --> 00:26:01,840
Speaker 1: re placed and we get to a capitalist system. Again,

482
00:26:02,040 --> 00:26:04,080
Speaker 1: that's a big if. And looking at the whole way,

483
00:26:04,240 --> 00:26:07,280
Speaker 1: all of Latin America is going commonest right now, that

484
00:26:07,440 --> 00:26:11,600
Speaker 1: if is looking further and farther away at this point. Um, Okay,

485
00:26:11,920 --> 00:26:17,160
Speaker 1: let's keep you mentioned. Uh, you mentioned geopolitical risk Iran.

486
00:26:17,840 --> 00:26:23,320
Speaker 1: So there's problems with Iran potentially I Ran and Saudi Arabia. Um,

487
00:26:23,400 --> 00:26:27,439
Speaker 1: does that affect the output the supply side in Iran

488
00:26:27,440 --> 00:26:29,480
Speaker 1: and Saudia? I mean, I guess if something erupts or

489
00:26:29,560 --> 00:26:32,280
Speaker 1: is this this is this geopolitical risk already disrupting that

490
00:26:32,359 --> 00:26:36,240
Speaker 1: amount of oil being put out. So Orian already is

491
00:26:36,320 --> 00:26:39,320
Speaker 1: producing less than they could and there's some debate over

492
00:26:39,320 --> 00:26:41,840
Speaker 1: how much more production they could bring on, but there

493
00:26:41,840 --> 00:26:45,320
Speaker 1: are very large fields there that are not being properly

494
00:26:45,400 --> 00:26:49,240
Speaker 1: developed using contemporary technology, and so I am optimistic that

495
00:26:49,280 --> 00:26:52,000
Speaker 1: they would be able to bring on substantial additional production.

496
00:26:52,359 --> 00:26:55,520
Speaker 1: It would just require a lot of reinvestment. And again

497
00:26:55,800 --> 00:26:58,600
Speaker 1: they have actually they have a large populace that was

498
00:26:58,800 --> 00:27:03,000
Speaker 1: very well off prior to some recent misbehavior and sanctions

499
00:27:03,000 --> 00:27:06,240
Speaker 1: and so on by their regime, and so there is

500
00:27:06,280 --> 00:27:08,880
Speaker 1: the potential for them to to grow production but also

501
00:27:08,960 --> 00:27:11,800
Speaker 1: grow demand. Um what I think you're referencing though. In

502
00:27:12,200 --> 00:27:15,480
Speaker 1: addition to that, so there's some constrained production that that's

503
00:27:15,520 --> 00:27:18,639
Speaker 1: constrained essentially politically UM, and would take a little bit

504
00:27:18,640 --> 00:27:21,480
Speaker 1: of time to bring on. UM. But there's there's a

505
00:27:21,600 --> 00:27:26,880
Speaker 1: sort of cold war ish between Saudi Arabia and Iran

506
00:27:27,280 --> 00:27:31,119
Speaker 1: that occasionally goes hot, and it seems like some current

507
00:27:31,160 --> 00:27:33,600
Speaker 1: threats about that as well. Yeah, absolutely right, there have

508
00:27:33,680 --> 00:27:37,560
Speaker 1: been recent threats. There have been headlines. UM. Depending on

509
00:27:37,840 --> 00:27:40,120
Speaker 1: the delay in between when this is recorded and when

510
00:27:40,160 --> 00:27:42,840
Speaker 1: it comes out, who knows, maybe there will have already

511
00:27:42,880 --> 00:27:45,280
Speaker 1: been something that will have happened, and I joke, but

512
00:27:45,320 --> 00:27:48,040
Speaker 1: obviously I hope that no one would get hurt. UM.

513
00:27:48,119 --> 00:27:51,879
Speaker 1: So the thing that I think is important to understand

514
00:27:51,920 --> 00:27:53,640
Speaker 1: here and why this is. I mean, it's a very

515
00:27:53,640 --> 00:27:57,000
Speaker 1: important topic. It's great that you asked this. Um. Everyone

516
00:27:57,040 --> 00:27:59,560
Speaker 1: I think is a little bit complacent on this because

517
00:28:00,080 --> 00:28:02,320
Speaker 1: Saudi's oil fields were attacked. I think it was in

518
00:28:03,680 --> 00:28:07,400
Speaker 1: and that was a time where the world was slightly

519
00:28:07,480 --> 00:28:10,479
Speaker 1: oversupplied with oil. There was still this bubble going on

520
00:28:10,760 --> 00:28:14,840
Speaker 1: in US shale development, and UH there was just there

521
00:28:14,920 --> 00:28:18,040
Speaker 1: was more sort of short term high decline supply that

522
00:28:18,160 --> 00:28:21,040
Speaker 1: had come on than there was demand. So so prices

523
00:28:21,080 --> 00:28:24,439
Speaker 1: were suppressed and the world was adequately or oversupplied with oil.

524
00:28:24,760 --> 00:28:29,600
Speaker 1: So in that time, uh ran Via I think it

525
00:28:29,680 --> 00:28:33,840
Speaker 1: was hoothy proxies out of Yemen. Uh they attacked Saudi

526
00:28:33,880 --> 00:28:37,840
Speaker 1: oil fields as well as Saudi processing facilities, and they

527
00:28:37,840 --> 00:28:44,360
Speaker 1: temporarily reduced Saudia's production and oil processing capacity, and almost

528
00:28:44,400 --> 00:28:47,160
Speaker 1: without a beat, so oil shot up and then crashed

529
00:28:47,280 --> 00:28:50,280
Speaker 1: over like a roughly two or three day period around that,

530
00:28:50,520 --> 00:28:55,360
Speaker 1: and UH, through inventories that Saudi held elsewhere, they were

531
00:28:55,360 --> 00:28:59,560
Speaker 1: able to essentially bring on additional oil to market and

532
00:28:59,640 --> 00:29:03,160
Speaker 1: to send really suppress the price increase from the additional

533
00:29:03,240 --> 00:29:05,920
Speaker 1: risk from that attack. And so I think people look

534
00:29:05,920 --> 00:29:08,160
Speaker 1: at that and they get the wrong lesson. They look

535
00:29:08,200 --> 00:29:10,880
Speaker 1: at that and they think, oh, Saudi has essentially unlimited

536
00:29:10,880 --> 00:29:14,280
Speaker 1: production capacity and unlimited inventory, and would be able to

537
00:29:14,320 --> 00:29:18,680
Speaker 1: bring on enough production to be able to essentially safeguard

538
00:29:18,680 --> 00:29:21,760
Speaker 1: the market if something happened. My takeaway is the world

539
00:29:21,840 --> 00:29:23,760
Speaker 1: is very different right now than it was in twenty

540
00:29:24,640 --> 00:29:27,760
Speaker 1: and in an under an undersupplied market rather than an

541
00:29:27,760 --> 00:29:30,440
Speaker 1: oversupplied market. If there were to be a similar sort

542
00:29:30,440 --> 00:29:35,160
Speaker 1: of disruption, especially with Saudi inventories much lower today, both

543
00:29:35,320 --> 00:29:39,600
Speaker 1: locally as well as their their holdings internationally, um, there's

544
00:29:39,640 --> 00:29:42,400
Speaker 1: a real risk that we could see materially higher prices

545
00:29:42,480 --> 00:29:44,840
Speaker 1: in a very different reaction. So I think I think

546
00:29:44,920 --> 00:29:48,360
Speaker 1: energy analysts are sort of jaded having seen what happened.

547
00:29:48,400 --> 00:29:51,400
Speaker 1: I think the markets jaded having seen what happened. But

548
00:29:52,000 --> 00:29:55,440
Speaker 1: what happened then doesn't mean that will have the same

549
00:29:55,640 --> 00:29:58,680
Speaker 1: consequence as what could happen if a RAN were to

550
00:29:58,800 --> 00:30:04,240
Speaker 1: attack again. Success Okay, and then the last one I

551
00:30:04,320 --> 00:30:08,360
Speaker 1: have here on the supply side is to the United States,

552
00:30:08,520 --> 00:30:11,280
Speaker 1: And let's leave the politics side out and just look

553
00:30:11,280 --> 00:30:15,280
Speaker 1: at the potential. Um. So I've seen some people say

554
00:30:15,360 --> 00:30:20,960
Speaker 1: that fracking is tapped out and the wells are declining UM.

555
00:30:21,120 --> 00:30:23,560
Speaker 1: Other people say, no, you know, we have more technology,

556
00:30:23,600 --> 00:30:26,240
Speaker 1: we can, we can, we can find new wells, etcetera. UM,

557
00:30:26,280 --> 00:30:29,120
Speaker 1: where do you look on just the supply side of

558
00:30:29,120 --> 00:30:31,880
Speaker 1: the United States and our ability to continue to produce

559
00:30:32,400 --> 00:30:36,600
Speaker 1: UM at at current levels or increase production. So I

560
00:30:36,640 --> 00:30:39,520
Speaker 1: think we need to invest a lot more in our

561
00:30:39,560 --> 00:30:42,840
Speaker 1: services capacity as well as in exploration in order to

562
00:30:42,840 --> 00:30:47,160
Speaker 1: be able to grow US production from here. So certainly,

563
00:30:47,440 --> 00:30:51,640
Speaker 1: in at least some shale oil fields, well productivity is declining.

564
00:30:51,680 --> 00:30:55,880
Speaker 1: It's not growing. And in other fields, well productivity seems

565
00:30:55,880 --> 00:30:58,560
Speaker 1: to have flatlined, which is usually the precursor. It's like

566
00:30:58,560 --> 00:31:00,680
Speaker 1: if you throw a ball up in the air. It

567
00:31:00,960 --> 00:31:03,280
Speaker 1: goes up fast at first, and then it slows and

568
00:31:03,320 --> 00:31:05,920
Speaker 1: then it stops and then it falls. So there's like

569
00:31:05,960 --> 00:31:08,840
Speaker 1: this moment where it's flat and you know, it doesn't

570
00:31:08,880 --> 00:31:12,560
Speaker 1: stay with gravity doesn't stay very long with well production

571
00:31:12,880 --> 00:31:16,000
Speaker 1: and well productivity in an oil field, that might flatline

572
00:31:16,000 --> 00:31:19,080
Speaker 1: for a while UM and then fall, But very rarely

573
00:31:19,200 --> 00:31:23,280
Speaker 1: does well productivity flatline and then rise more and so,

574
00:31:23,600 --> 00:31:26,400
Speaker 1: and it has to do with the degradation of core inventory.

575
00:31:26,440 --> 00:31:29,520
Speaker 1: Companies almost always drill their best wells first, which means

576
00:31:29,680 --> 00:31:31,600
Speaker 1: the wells that are left after they drill their best

577
00:31:31,600 --> 00:31:34,680
Speaker 1: wells are less good, and then they drilled the next best,

578
00:31:34,840 --> 00:31:36,840
Speaker 1: and then the next best and so on and so

579
00:31:36,960 --> 00:31:41,600
Speaker 1: technology improves, but the rock quality declines and absent new discoveries,

580
00:31:41,640 --> 00:31:44,240
Speaker 1: you end up with this sort of treadmill or worse

581
00:31:44,760 --> 00:31:48,520
Speaker 1: in field and well productivity. So the way that shale

582
00:31:48,840 --> 00:31:51,720
Speaker 1: combated that, the way that these producers combated that and

583
00:31:51,800 --> 00:31:54,760
Speaker 1: we're able to grow was by adding drilling rigs, by

584
00:31:54,800 --> 00:31:59,520
Speaker 1: adding completion crews, and you know, by increasing by using

585
00:31:59,520 --> 00:32:04,600
Speaker 1: technology you well, to increase well productivity, uh to overcome

586
00:32:04,760 --> 00:32:07,520
Speaker 1: the high decline rates from their wells. And again what

587
00:32:07,560 --> 00:32:10,320
Speaker 1: we're seeing is that in many, if not most of

588
00:32:10,360 --> 00:32:14,080
Speaker 1: these fields, they've already peaked and well productivity is falling

589
00:32:14,360 --> 00:32:18,360
Speaker 1: or they're peaking and well productivity isn't rising. So again,

590
00:32:18,400 --> 00:32:23,040
Speaker 1: just the the trend seems to be that we're plateau

591
00:32:23,160 --> 00:32:25,920
Speaker 1: ing for US oil production. And again, what you need

592
00:32:25,960 --> 00:32:28,360
Speaker 1: to do to solve that would be to build a

593
00:32:28,400 --> 00:32:31,880
Speaker 1: bunch more drilling rigs, to build a bunch more pressure pumping,

594
00:32:32,040 --> 00:32:35,480
Speaker 1: to build more pipelines, to hire a lot more people

595
00:32:35,800 --> 00:32:38,320
Speaker 1: and provide all the different things in the supply chain,

596
00:32:38,800 --> 00:32:42,160
Speaker 1: and you know, we're not quite there yet. Services costs

597
00:32:42,320 --> 00:32:45,480
Speaker 1: have risen a lot, but we probably need another sort

598
00:32:45,480 --> 00:32:48,560
Speaker 1: of step change up, and I think to get that

599
00:32:48,680 --> 00:32:53,440
Speaker 1: capital you need much higher oil and gas equity share prices.

600
00:32:53,680 --> 00:32:55,600
Speaker 1: So it's like part of why I'm so bullish on

601
00:32:55,680 --> 00:32:59,120
Speaker 1: the equities is that they really it's not just about

602
00:32:59,120 --> 00:33:01,480
Speaker 1: oil price. You all so need the equities higher, but

603
00:33:01,560 --> 00:33:04,640
Speaker 1: you'd also probably need much higher oil and natural gas

604
00:33:04,640 --> 00:33:08,440
Speaker 1: prices such that the companies can lock in those prices

605
00:33:08,720 --> 00:33:12,520
Speaker 1: and be able to guarantee services companies multi year contracts

606
00:33:12,520 --> 00:33:15,000
Speaker 1: such that they can go raise the capital to be

607
00:33:15,040 --> 00:33:18,200
Speaker 1: able to go get more rigs and pressure pumping into

608
00:33:18,240 --> 00:33:21,360
Speaker 1: other services equipment built. So there's sort of this chicken

609
00:33:21,400 --> 00:33:25,000
Speaker 1: and egg, and neither have happened quite yet, and both

610
00:33:25,080 --> 00:33:28,040
Speaker 1: of them need to happen substantially more, both much higher

611
00:33:28,080 --> 00:33:32,200
Speaker 1: oil and gas equity prices and valuations as well as

612
00:33:32,800 --> 00:33:36,760
Speaker 1: um much higher prices, as well as much higher returns

613
00:33:36,800 --> 00:33:40,440
Speaker 1: for drilling, which requires higher oil and gas commodity prices.

614
00:33:41,080 --> 00:33:45,280
Speaker 1: M HM. So the central theme is that this happens

615
00:33:45,360 --> 00:33:48,280
Speaker 1: very slowly, and it requires lots of capital and lots

616
00:33:48,280 --> 00:33:50,760
Speaker 1: of long term planning and thinking and so if we

617
00:33:50,760 --> 00:33:52,920
Speaker 1: want to affect the supply side, we need to think

618
00:33:53,000 --> 00:33:56,160
Speaker 1: long term need and we need to invest lots of capex.

619
00:33:56,400 --> 00:33:58,520
Speaker 1: And it doesn't happen quickly, right, that sums up the

620
00:33:58,560 --> 00:34:00,880
Speaker 1: supply side, and we don't and we don't see we

621
00:34:00,960 --> 00:34:03,680
Speaker 1: don't see any new big chunks of supply coming on.

622
00:34:03,720 --> 00:34:06,400
Speaker 1: If anything, it looks like we'll be kind of hovering

623
00:34:06,480 --> 00:34:10,200
Speaker 1: here or dwindling down unless we make those big investments

624
00:34:10,239 --> 00:34:13,560
Speaker 1: and invest that time. Yeah. So there's actually one other

625
00:34:13,600 --> 00:34:16,880
Speaker 1: place we should talk about very briefly, which is Brazil.

626
00:34:17,280 --> 00:34:21,759
Speaker 1: And so again ignoring the political aspect, Okay, how do

627
00:34:21,800 --> 00:34:24,480
Speaker 1: you undergnore that? But yeah, you just you just do

628
00:34:24,560 --> 00:34:29,440
Speaker 1: because the technical aspect is fascinating and you see how

629
00:34:29,480 --> 00:34:31,359
Speaker 1: it's like either going to be bad or worse from

630
00:34:31,360 --> 00:34:35,560
Speaker 1: a supply perspective. So there's been a relatively free market

631
00:34:35,600 --> 00:34:41,000
Speaker 1: oriented uh president there uh, and there's now a potentially

632
00:34:41,040 --> 00:34:47,160
Speaker 1: contested election UM, and either the incumbent is going to

633
00:34:47,280 --> 00:34:50,560
Speaker 1: stay or there will be a left wing president who

634
00:34:50,719 --> 00:34:55,680
Speaker 1: had been running the country previously UM. And either way

635
00:34:55,800 --> 00:34:59,719
Speaker 1: with this relatively right wing or sort of more free

636
00:34:59,719 --> 00:35:05,520
Speaker 1: market oriented president that they've had UM, oil production in

637
00:35:05,600 --> 00:35:09,480
Speaker 1: Brazil has disappointed every year. And I saw this one

638
00:35:09,560 --> 00:35:13,520
Speaker 1: chart years ago which showed Petro Boss's forecasts for how

639
00:35:13,600 --> 00:35:15,800
Speaker 1: much they're supposed to produce and how much they're supposed

640
00:35:15,840 --> 00:35:18,840
Speaker 1: to grow versus how much they actually grew. And every

641
00:35:18,960 --> 00:35:21,879
Speaker 1: year they forecast like ten or growth and I think

642
00:35:21,920 --> 00:35:25,120
Speaker 1: the I e. A and others had those forecasts and

643
00:35:25,200 --> 00:35:28,960
Speaker 1: their models, and every year UH Petro Boss would basically

644
00:35:29,080 --> 00:35:32,759
Speaker 1: have relatively flat production or their growth would come in

645
00:35:32,840 --> 00:35:35,719
Speaker 1: much lower than what they had forecast, as well as

646
00:35:35,760 --> 00:35:39,560
Speaker 1: what international agencies forecast. And Petro Boss just reported and

647
00:35:39,600 --> 00:35:42,719
Speaker 1: lo and behold, their production numbers missed yet again. And

648
00:35:42,800 --> 00:35:45,720
Speaker 1: so it's important to remember that when you think about

649
00:35:45,760 --> 00:35:48,799
Speaker 1: all these different places where we hear stories about discoveries,

650
00:35:49,160 --> 00:35:52,080
Speaker 1: your stories about success in oil fields, and it's not

651
00:35:52,120 --> 00:35:54,640
Speaker 1: that Petro Boss and not that Brazil UH from an

652
00:35:54,640 --> 00:35:58,520
Speaker 1: oil perspective, isn't highly successful. They're extremely successful. They're just

653
00:35:58,640 --> 00:36:02,600
Speaker 1: not growing their production in the manner that everyone's expecting.

654
00:36:02,640 --> 00:36:05,719
Speaker 1: And actually they came out with a negative number. They

655
00:36:05,760 --> 00:36:09,200
Speaker 1: shrank their production a little, so that's worth noting. It's

656
00:36:09,200 --> 00:36:12,560
Speaker 1: it's less of a Brazil specific story and more of

657
00:36:12,560 --> 00:36:16,680
Speaker 1: a story of increasing difficulty in getting oil out of

658
00:36:16,719 --> 00:36:22,319
Speaker 1: discovered fields, as well as limited exploration activity and few

659
00:36:22,400 --> 00:36:25,480
Speaker 1: fields that have been discovered that are more productive than

660
00:36:25,719 --> 00:36:29,920
Speaker 1: the fields that were currently aware of. Okay, so, um,

661
00:36:29,960 --> 00:36:31,920
Speaker 1: you know, I'm trying to set this up for everyone

662
00:36:31,960 --> 00:36:34,680
Speaker 1: that's just listening right now. Like, price is always supply

663
00:36:34,680 --> 00:36:36,880
Speaker 1: and demand. So I want to look at the supply side.

664
00:36:36,880 --> 00:36:39,840
Speaker 1: We don't see any new supply coming on. If anything,

665
00:36:39,880 --> 00:36:43,520
Speaker 1: we're kind of flatlining and probably going to be dwindling down. Um,

666
00:36:43,680 --> 00:36:46,319
Speaker 1: if we could make massive investments and improvements, but it

667
00:36:46,320 --> 00:36:47,799
Speaker 1: takes a long time. So then we want to look

668
00:36:47,840 --> 00:36:50,600
Speaker 1: at the demand side. If demand stays the same and

669
00:36:50,600 --> 00:36:52,840
Speaker 1: supply goes down, then we would expect higher prices. I

670
00:36:52,840 --> 00:36:55,239
Speaker 1: mean if that's a very elementary way to look at it.

671
00:36:55,400 --> 00:37:00,000
Speaker 1: So if we look at the demand side of things, then, um,

672
00:37:00,080 --> 00:37:03,960
Speaker 1: your long term thesis on demand is that humanity is

673
00:37:03,960 --> 00:37:08,000
Speaker 1: still gonna need energy. Yeah, I mean, for some reason,

674
00:37:08,080 --> 00:37:10,279
Speaker 1: humans are still gonna want to drive and transport things

675
00:37:10,320 --> 00:37:12,840
Speaker 1: around the world and something. Yeah. I mean when you

676
00:37:12,880 --> 00:37:17,120
Speaker 1: look at world demand for oil, for the last forty years, approximately,

677
00:37:17,520 --> 00:37:20,160
Speaker 1: world oil demand has grown by at least one percent

678
00:37:20,200 --> 00:37:23,959
Speaker 1: a year, and there's always bad things happening, and there's

679
00:37:23,960 --> 00:37:28,280
Speaker 1: always a scary story and a negative story, and um,

680
00:37:28,360 --> 00:37:30,840
Speaker 1: you know, I always think of Peter Lynch when I

681
00:37:30,840 --> 00:37:34,080
Speaker 1: think about this, where he talks about how more money

682
00:37:34,239 --> 00:37:38,400
Speaker 1: is lost in anticipation of downturns than is lost during

683
00:37:38,440 --> 00:37:42,560
Speaker 1: actual downturns because people missed the gains from being in

684
00:37:42,600 --> 00:37:45,000
Speaker 1: the market over the long term by being out of

685
00:37:45,040 --> 00:37:49,640
Speaker 1: it because they're worried about a potential future crash, and so, um,

686
00:37:49,719 --> 00:37:52,080
Speaker 1: you know, there's only been a few years where oil

687
00:37:52,320 --> 00:37:56,000
Speaker 1: demand has been off from that one percent annual world

688
00:37:56,120 --> 00:37:59,560
Speaker 1: growth rate. One was I think it was two thousand

689
00:37:59,600 --> 00:38:02,239
Speaker 1: and line. I think even two thousand and eight was fine.

690
00:38:02,280 --> 00:38:04,640
Speaker 1: I think it was the economic the knock on effects

691
00:38:04,680 --> 00:38:08,520
Speaker 1: of the um of the financial crisis, and then uh

692
00:38:08,800 --> 00:38:12,960
Speaker 1: during and immediately after COVID, And so what you saw

693
00:38:13,160 --> 00:38:15,360
Speaker 1: in two thousand nine was by two thousand ten, you

694
00:38:15,400 --> 00:38:18,520
Speaker 1: were already seeing world demand growing to catch up with

695
00:38:18,600 --> 00:38:22,720
Speaker 1: that sort of long term one percent plus global demand

696
00:38:22,760 --> 00:38:26,040
Speaker 1: growth trend. And what it looks like we're seeing post

697
00:38:26,080 --> 00:38:28,960
Speaker 1: COVID is the same thing where we're seeing They call

698
00:38:29,000 --> 00:38:31,759
Speaker 1: it revenge travel, they call it whatever they want. Um,

699
00:38:31,800 --> 00:38:34,720
Speaker 1: even with sort of sketchy ei A numbers. Even with whatever,

700
00:38:34,760 --> 00:38:38,920
Speaker 1: you could just see enormous travel. UH. But you know,

701
00:38:39,000 --> 00:38:44,040
Speaker 1: planes driving, hotels have been pretty heavily booked up, restaurants

702
00:38:44,040 --> 00:38:48,200
Speaker 1: are busy, and so you're you're seeing this demand recovery

703
00:38:48,800 --> 00:38:53,040
Speaker 1: uh for transportation, and that translates to oil demand. And

704
00:38:53,080 --> 00:38:55,560
Speaker 1: then I think what you're alluding to also is that

705
00:38:55,600 --> 00:38:59,520
Speaker 1: when you get to certain wealth levels in emerging markets,

706
00:39:00,000 --> 00:39:02,000
Speaker 1: as you get to sort of two thousand dollars per

707
00:39:02,080 --> 00:39:08,200
Speaker 1: capita uh GDP, you get people starting to drive scooters

708
00:39:08,239 --> 00:39:12,920
Speaker 1: and other sort of basic hydrocarbon powered devices to to

709
00:39:13,000 --> 00:39:15,279
Speaker 1: get them to their products, to market it, to get

710
00:39:15,320 --> 00:39:18,120
Speaker 1: to work, to you know, drive more people around sort

711
00:39:18,120 --> 00:39:20,719
Speaker 1: of the equivalent of taxis or uberst or whatever. And

712
00:39:20,760 --> 00:39:23,759
Speaker 1: then at ten thousand dollars a day or starry ten

713
00:39:23,760 --> 00:39:27,239
Speaker 1: thousand dollars per capita GDP, you start to see more

714
00:39:27,280 --> 00:39:29,600
Speaker 1: people own their own cars, You start to see traffic

715
00:39:29,680 --> 00:39:33,600
Speaker 1: jams and UH and and those those demand trends are

716
00:39:33,640 --> 00:39:39,200
Speaker 1: actually somewhat unlinked to year over year GDP changes. So

717
00:39:39,480 --> 00:39:42,920
Speaker 1: once you're over ten thousand dollars per capita GDP, it

718
00:39:43,000 --> 00:39:45,840
Speaker 1: kind of doesn't matter if you're at fifteen thousand dollars

719
00:39:45,840 --> 00:39:49,160
Speaker 1: per capita GDP one year, and then fourteen thousand the

720
00:39:49,160 --> 00:39:51,600
Speaker 1: next year, and then seventeen thousand, Like it doesn't The

721
00:39:51,600 --> 00:39:54,520
Speaker 1: path actually doesn't matter much in terms of increasing consumption.

722
00:39:54,800 --> 00:39:57,920
Speaker 1: So demand looks really good because there are a number

723
00:39:57,920 --> 00:40:02,120
Speaker 1: of countries that crossed that threshold during COVID, shortly before it,

724
00:40:02,239 --> 00:40:05,680
Speaker 1: or crossing it now, and you're just you're seeing emerging

725
00:40:05,719 --> 00:40:09,080
Speaker 1: market and frontier market demand grow in a way that

726
00:40:09,200 --> 00:40:13,239
Speaker 1: I think international agencies and sort of like woke corporations

727
00:40:13,280 --> 00:40:17,160
Speaker 1: are really struggling with um that they're shocked to see

728
00:40:17,200 --> 00:40:20,200
Speaker 1: that other people want to live in a manner similar

729
00:40:20,239 --> 00:40:23,319
Speaker 1: to how how we are living? How dare they? How

730
00:40:23,400 --> 00:40:26,719
Speaker 1: dare they want to live? That? Um When we look

731
00:40:26,719 --> 00:40:28,520
Speaker 1: at that, and then if we if we look back

732
00:40:28,600 --> 00:40:30,719
Speaker 1: through you know, the last hundred years, we can see

733
00:40:30,719 --> 00:40:33,160
Speaker 1: that as we've used more and more energy, and we've

734
00:40:33,239 --> 00:40:37,279
Speaker 1: used different types of energy, it doesn't actually decrease existing.

735
00:40:37,400 --> 00:40:40,880
Speaker 1: So we bring on nuclear, we bring on renewables, it

736
00:40:40,960 --> 00:40:44,239
Speaker 1: doesn't decrease the amount of hydrocarbons that we use. So

737
00:40:44,560 --> 00:40:47,120
Speaker 1: I I put I tweeted this out the other day.

738
00:40:47,160 --> 00:40:50,800
Speaker 1: It was a clip from was It Squawk? Box or whatever.

739
00:40:50,840 --> 00:40:53,440
Speaker 1: I forget the guy from Goldman and he was saying, um,

740
00:40:53,560 --> 00:40:56,759
Speaker 1: we spent with three point eight trillion dollars on renewables

741
00:40:57,440 --> 00:41:00,120
Speaker 1: and we brought the fossil fuel consumption from a D

742
00:41:00,160 --> 00:41:04,680
Speaker 1: two UM. But he said it's probably worse than that

743
00:41:04,680 --> 00:41:06,759
Speaker 1: now because now we're going back to coal. Now we're

744
00:41:06,760 --> 00:41:08,320
Speaker 1: going back to burn and fiery were at goals and

745
00:41:08,320 --> 00:41:11,480
Speaker 1: when the numbers probably just will probably higher than or

746
00:41:11,520 --> 00:41:15,120
Speaker 1: whatever UM. And so that's kind of like, so, I

747
00:41:15,160 --> 00:41:16,960
Speaker 1: guess when we look at the demand side, if we

748
00:41:17,200 --> 00:41:20,040
Speaker 1: think about, you know, this ev revolution, we're gonna spend

749
00:41:20,080 --> 00:41:22,480
Speaker 1: another now what they're calling for six trillion a year

750
00:41:22,520 --> 00:41:25,160
Speaker 1: to push into that naives but renewables UM and then

751
00:41:25,160 --> 00:41:27,719
Speaker 1: potentially now there's this push to bring nuclear back on.

752
00:41:28,080 --> 00:41:30,000
Speaker 1: But you don't see that as really putting a dent

753
00:41:30,160 --> 00:41:32,839
Speaker 1: in the demand that we'd have for hydrocarbon fuel, oil

754
00:41:32,840 --> 00:41:36,160
Speaker 1: and natural gas. Not in the shorter medium term. I

755
00:41:36,200 --> 00:41:39,080
Speaker 1: think in the very long term it's entirely possible, and

756
00:41:39,280 --> 00:41:42,319
Speaker 1: especially if some of our friends are right on their

757
00:41:42,360 --> 00:41:46,279
Speaker 1: oil price predictions. I have my CuPy W T I

758
00:41:46,320 --> 00:41:50,480
Speaker 1: two fifty hat on my desk and uh, you know,

759
00:41:50,719 --> 00:41:52,680
Speaker 1: to the extent that oil goes to a price that

760
00:41:52,760 --> 00:41:55,440
Speaker 1: shockingly high, I do think that we'll start to see

761
00:41:55,719 --> 00:42:00,160
Speaker 1: demand actually transition from true demand destruction. Um. But but

762
00:42:00,200 --> 00:42:04,480
Speaker 1: that does look quite different than what I think alternative

763
00:42:04,600 --> 00:42:09,160
Speaker 1: energy proselytizers and politicians and policymakers are really trying to

764
00:42:09,200 --> 00:42:12,680
Speaker 1: push it. Just you end up restructuring society to some extent.

765
00:42:12,880 --> 00:42:16,880
Speaker 1: You end up pushing innovation and new technologies and new

766
00:42:17,040 --> 00:42:21,400
Speaker 1: new mechanisms for demand. But yeah, it's very very difficult. Um.

767
00:42:21,440 --> 00:42:23,799
Speaker 1: You know, Alex Epstein does a good job covering this.

768
00:42:24,040 --> 00:42:27,239
Speaker 1: Before him, I forget who authored it, but there was

769
00:42:27,280 --> 00:42:28,719
Speaker 1: this great book I read at the start of my

770
00:42:28,760 --> 00:42:31,560
Speaker 1: career that The Bottomless Well, which also talks about it,

771
00:42:31,600 --> 00:42:34,800
Speaker 1: where essentially, the more efficient you get at using energy,

772
00:42:34,840 --> 00:42:38,600
Speaker 1: the more you use, not not less. So um, it

773
00:42:38,719 --> 00:42:42,239
Speaker 1: sort of helps explain. I forget which Scandinavian country it is,

774
00:42:42,280 --> 00:42:45,600
Speaker 1: but one of them. Their e V adoption is very high,

775
00:42:45,760 --> 00:42:49,440
Speaker 1: and yet their per capita oil consumption has not dropped.

776
00:42:50,040 --> 00:42:54,200
Speaker 1: So it makes you wonder what the rushes to try

777
00:42:54,239 --> 00:42:58,200
Speaker 1: to push electric vehicles if their inputs are very polluting.

778
00:42:58,560 --> 00:43:03,359
Speaker 1: But then also they don't actually destroy oil demand, so um, yeah,

779
00:43:03,400 --> 00:43:05,279
Speaker 1: I think I think longer term there is that risk,

780
00:43:05,360 --> 00:43:07,960
Speaker 1: especially price driven, but I think a lot of the

781
00:43:08,040 --> 00:43:12,960
Speaker 1: predictions of this is going away, is going away by whatever.

782
00:43:13,360 --> 00:43:16,760
Speaker 1: A lot of those are likely not to be followed

783
00:43:16,760 --> 00:43:21,279
Speaker 1: through with and and they're just physical limitations to executing

784
00:43:21,320 --> 00:43:24,640
Speaker 1: on those. Now let's bring it back more shorter term

785
00:43:24,719 --> 00:43:28,640
Speaker 1: over the next year. UM, we have the Fed Jerome

786
00:43:28,680 --> 00:43:32,320
Speaker 1: pal saying they're gonna crush the economy. They gotta crush.

787
00:43:32,360 --> 00:43:36,360
Speaker 1: They're they're committed to stopping inflation. Jerome Pale said with

788
00:43:36,520 --> 00:43:38,680
Speaker 1: three times. I think in the September press or pain,

789
00:43:38,760 --> 00:43:41,239
Speaker 1: pain pain, people need to expect pain. They expect pain.

790
00:43:41,640 --> 00:43:44,240
Speaker 1: They're out this week with the film flments. He meeting

791
00:43:44,280 --> 00:43:47,879
Speaker 1: as well. Again he's trying to We're gonna crush the man,

792
00:43:47,920 --> 00:43:51,359
Speaker 1: crush the man, crush demand, which um basically make everybody poor,

793
00:43:51,400 --> 00:43:53,120
Speaker 1: so they can't afford to travel, and they can't afford

794
00:43:53,160 --> 00:43:57,399
Speaker 1: about to eat, and can't afford to drive their cars, etcetera. Um,

795
00:43:57,520 --> 00:44:00,759
Speaker 1: what do you see, I mean, can they really do

796
00:44:00,800 --> 00:44:03,560
Speaker 1: you think they can crush demand to the point that

797
00:44:03,640 --> 00:44:07,200
Speaker 1: it brings the price of oil down, because I mean

798
00:44:07,200 --> 00:44:09,960
Speaker 1: they could, they could slow the demand. We don't drive

799
00:44:10,000 --> 00:44:13,040
Speaker 1: as much, but then the supply could also be decreased

800
00:44:13,040 --> 00:44:16,320
Speaker 1: to offset that, right, And that is that a battle?

801
00:44:16,600 --> 00:44:18,600
Speaker 1: Is that a battle they're engaged in? And can they

802
00:44:18,600 --> 00:44:22,640
Speaker 1: win that battle? I mean they've they've said directly that

803
00:44:22,680 --> 00:44:25,720
Speaker 1: they're not really trying to affect the price of oil

804
00:44:25,840 --> 00:44:27,799
Speaker 1: or the price of energy because they say that's out

805
00:44:27,840 --> 00:44:30,080
Speaker 1: of their control. Um. I think you bring up a

806
00:44:30,080 --> 00:44:33,040
Speaker 1: really good point in terms of supply, where if you

807
00:44:33,120 --> 00:44:35,880
Speaker 1: raise interest rates, you're raising the cost of capital and

808
00:44:35,880 --> 00:44:40,319
Speaker 1: you're reducing capital investment. So UM, you know I really,

809
00:44:40,360 --> 00:44:43,600
Speaker 1: I mean, I'm a University of Chicago trained economist. Um.

810
00:44:43,640 --> 00:44:46,000
Speaker 1: I actually decided to go to Versity of Chicago because

811
00:44:46,080 --> 00:44:48,400
Speaker 1: when I was accepted and I visited, there was a

812
00:44:48,480 --> 00:44:50,880
Speaker 1: symposium in honor of Milton Friedman, and I got to

813
00:44:50,920 --> 00:44:54,360
Speaker 1: hear Milton Freedman and Gary Becker and five other Nobel

814
00:44:54,400 --> 00:44:57,760
Speaker 1: Prize winning your verse Chicago economists talk about incentive theory

815
00:44:57,800 --> 00:45:00,239
Speaker 1: and sort of how you know what it meant when

816
00:45:00,239 --> 00:45:03,120
Speaker 1: Milton Freeman sort of figured it out from a theoretical perspective,

817
00:45:03,160 --> 00:45:05,840
Speaker 1: as well as how it applied to their work. And

818
00:45:06,280 --> 00:45:09,440
Speaker 1: so you know, I'm very biased towards Milton Freeman, and

819
00:45:09,480 --> 00:45:11,800
Speaker 1: there are these great videos of him talking about central

820
00:45:11,800 --> 00:45:15,239
Speaker 1: bankers from thirty years ago, forty years ago, and he

821
00:45:15,960 --> 00:45:18,680
Speaker 1: made this critique where the FED is always wrong and

822
00:45:18,680 --> 00:45:21,279
Speaker 1: they'll never admit it, and they just go from being

823
00:45:21,320 --> 00:45:24,560
Speaker 1: wrong in one direction to wrong another direction. So, um,

824
00:45:24,600 --> 00:45:27,560
Speaker 1: I think they're making an enormous policy mistake trying to

825
00:45:27,600 --> 00:45:32,440
Speaker 1: fight a supply shortfall by killing demand, and I think

826
00:45:32,480 --> 00:45:36,080
Speaker 1: they're really hurting the most vulnerable people and it's just

827
00:45:36,200 --> 00:45:40,800
Speaker 1: a horrible policy error. Um. That being said, they can

828
00:45:40,840 --> 00:45:44,200
Speaker 1: be effective in the short term in crashing the economy,

829
00:45:44,480 --> 00:45:47,000
Speaker 1: and so they may be able to force the oil

830
00:45:47,040 --> 00:45:50,120
Speaker 1: prices down in the short term by really crashing the

831
00:45:50,239 --> 00:45:53,560
Speaker 1: U S economy as well as crashing international markets through

832
00:45:53,600 --> 00:45:57,080
Speaker 1: sending the dollar up on a relative basis versus other

833
00:45:57,120 --> 00:46:01,080
Speaker 1: currencies by creating sovereign debt crises in a number of

834
00:46:01,080 --> 00:46:04,799
Speaker 1: different countries. So they can do that in the short term,

835
00:46:04,840 --> 00:46:08,560
Speaker 1: but the very likely outcome of that would be them

836
00:46:08,560 --> 00:46:12,600
Speaker 1: turning around and printing rapidly and enormously, which would then

837
00:46:12,680 --> 00:46:15,759
Speaker 1: send prices much much higher. So I try to be

838
00:46:15,840 --> 00:46:19,719
Speaker 1: positioned conservatively. I'm not in the camp of hey, I

839
00:46:19,800 --> 00:46:21,480
Speaker 1: know where oil is going to be in a week,

840
00:46:21,520 --> 00:46:23,759
Speaker 1: a month, the year. I don't know. I just know

841
00:46:23,880 --> 00:46:26,560
Speaker 1: that to balance the oil market we're likely going to

842
00:46:26,680 --> 00:46:29,880
Speaker 1: need much higher prices for a while. And the longer

843
00:46:29,960 --> 00:46:32,839
Speaker 1: oil prices stay low, the higher they need to go,

844
00:46:33,360 --> 00:46:35,799
Speaker 1: and the longer they need to stay high in order

845
00:46:35,840 --> 00:46:37,799
Speaker 1: to be able to balance the market. So again, like,

846
00:46:37,840 --> 00:46:39,640
Speaker 1: I don't know that anyone really knows what's going to

847
00:46:39,719 --> 00:46:42,359
Speaker 1: happen with the economy and with demand. And that's sort

848
00:46:42,360 --> 00:46:45,759
Speaker 1: of where I lean more towards supply, where it's more predictable,

849
00:46:46,160 --> 00:46:50,560
Speaker 1: and less towards trying to predict shorter term demand, because again,

850
00:46:50,600 --> 00:46:53,480
Speaker 1: there there are some unknown unknowns that just make it

851
00:46:53,600 --> 00:46:56,799
Speaker 1: very very difficult to forecast. Yeah, I mean no, there's

852
00:46:56,800 --> 00:46:59,840
Speaker 1: no such thing as certainty. Is obviously um probabilities, But

853
00:46:59,880 --> 00:47:02,359
Speaker 1: I think the most probable outcome is probably what you've

854
00:47:02,560 --> 00:47:05,319
Speaker 1: just The FED is always wrong and they whip saw

855
00:47:05,360 --> 00:47:08,000
Speaker 1: and they air to the either side, right, and so

856
00:47:08,239 --> 00:47:09,960
Speaker 1: they're probably trying to crush the man. They'll probably go

857
00:47:10,000 --> 00:47:11,640
Speaker 1: too far and then they're going to have to try

858
00:47:11,640 --> 00:47:13,520
Speaker 1: to offset it. And actually he Pala set it in

859
00:47:13,520 --> 00:47:16,400
Speaker 1: the presser. He said, we'd rather the risk is uh

860
00:47:16,600 --> 00:47:19,520
Speaker 1: not doing enough, we'd rather go too far because we

861
00:47:19,560 --> 00:47:22,239
Speaker 1: have the tools to rebuild it later. And I'm paraphrasing

862
00:47:22,239 --> 00:47:24,239
Speaker 1: it something to that fact, and so he kind of

863
00:47:24,360 --> 00:47:27,080
Speaker 1: said that, like, let's just break it. We'll we'll pump

864
00:47:27,120 --> 00:47:30,439
Speaker 1: it back up later again. Um. But then we have

865
00:47:30,600 --> 00:47:33,480
Speaker 1: like a situation and this is UH. I think you

866
00:47:33,560 --> 00:47:38,600
Speaker 1: had retweeted Cupies little meme about UH President Biden saying,

867
00:47:39,320 --> 00:47:42,040
Speaker 1: if Saudi Arabia doesn't put push oil to three, I'll

868
00:47:42,040 --> 00:47:45,000
Speaker 1: push oil to three. And I think the kind of

869
00:47:45,000 --> 00:47:47,480
Speaker 1: thing is is that I think about as well, is

870
00:47:47,520 --> 00:47:51,160
Speaker 1: that nations around the world are having a problem. We saw,

871
00:47:51,280 --> 00:47:53,399
Speaker 1: you know, Germany for example, go from being a net

872
00:47:53,400 --> 00:47:55,600
Speaker 1: exporter to an importer because the cost of energy has

873
00:47:55,640 --> 00:47:57,919
Speaker 1: gone so high. Now they are being forced to try

874
00:47:57,960 --> 00:48:00,400
Speaker 1: to not just Germany but Japan except or trying to

875
00:48:00,440 --> 00:48:06,040
Speaker 1: force to um protect their currency but also import energy

876
00:48:06,080 --> 00:48:08,200
Speaker 1: at the same time, which every dangerous situation to be

877
00:48:08,400 --> 00:48:11,000
Speaker 1: m But then you have a situation with like Saudi Arabia,

878
00:48:11,080 --> 00:48:14,680
Speaker 1: which is like do they want to sell all their

879
00:48:14,719 --> 00:48:17,640
Speaker 1: oil output that if they have limited supply, as we've

880
00:48:17,640 --> 00:48:19,879
Speaker 1: already kind of covered, do they want to sell all

881
00:48:19,920 --> 00:48:24,600
Speaker 1: their output at seventy eight bucks of barrel four dollars

882
00:48:24,640 --> 00:48:27,080
Speaker 1: that are just going to be pumped and manipulated down,

883
00:48:27,600 --> 00:48:30,600
Speaker 1: or they rather sell less oil at a hundred and

884
00:48:30,600 --> 00:48:33,640
Speaker 1: fifty to fifty or three hundred bucks of barrel. It

885
00:48:33,680 --> 00:48:35,600
Speaker 1: seems like a logical question that you would have to

886
00:48:35,640 --> 00:48:38,960
Speaker 1: kind of ask, right, Yeah, I think it's really interesting

887
00:48:39,040 --> 00:48:42,680
Speaker 1: to see. Um. I think it's really interesting to see

888
00:48:43,000 --> 00:48:47,359
Speaker 1: journalists and other sort of analysts who don't have any

889
00:48:47,400 --> 00:48:51,359
Speaker 1: investment in the oil and gas space and so they're

890
00:48:51,400 --> 00:48:55,960
Speaker 1: not owners, talk about how no one wants oil prices

891
00:48:56,000 --> 00:48:58,239
Speaker 1: to be much higher than ninety dollars a barrel or

892
00:48:58,239 --> 00:49:03,000
Speaker 1: a hundred dollars. Right, It's ludicrous. You can tell. There's

893
00:49:03,040 --> 00:49:07,040
Speaker 1: just this fallacy there, which it's like if you owned

894
00:49:07,320 --> 00:49:11,359
Speaker 1: an apartment complex telling someone telling you that no one

895
00:49:11,400 --> 00:49:14,200
Speaker 1: would want rents to double, and it's like, well, no,

896
00:49:14,719 --> 00:49:17,320
Speaker 1: I want rents the double because I own an apartment complex.

897
00:49:17,520 --> 00:49:21,400
Speaker 1: So there's the everyone understands that, everyone understands that Apple

898
00:49:21,440 --> 00:49:24,280
Speaker 1: would like phone prices to double because they sell phones,

899
00:49:24,600 --> 00:49:27,080
Speaker 1: and yet somehow they think that oil is different and

900
00:49:27,120 --> 00:49:31,480
Speaker 1: that oil producers who owned their production wouldn't want prices

901
00:49:31,520 --> 00:49:34,600
Speaker 1: to be a lot higher, and so there is there

902
00:49:34,640 --> 00:49:36,880
Speaker 1: there are there are a set of people who are

903
00:49:37,280 --> 00:49:41,200
Speaker 1: um agents and not principles, and that's I think some

904
00:49:41,320 --> 00:49:43,880
Speaker 1: of where you saw the shale boom and bust and

905
00:49:43,920 --> 00:49:47,200
Speaker 1: where you've seen other sort of bad decisions made in

906
00:49:47,239 --> 00:49:50,680
Speaker 1: the industry. And one of the nice things about the downturn,

907
00:49:51,000 --> 00:49:52,839
Speaker 1: and you know, there were very few nice things. It

908
00:49:52,880 --> 00:49:55,640
Speaker 1: was really devastating and many people lost their jobs and

909
00:49:55,640 --> 00:49:57,000
Speaker 1: so on. But one of the nice things about the

910
00:49:57,040 --> 00:49:59,680
Speaker 1: oil downturn is that on the back end of it,

911
00:49:59,719 --> 00:50:02,760
Speaker 1: there are many more principles and there are fewer agents,

912
00:50:03,160 --> 00:50:07,040
Speaker 1: and there are more barriers to agents misbehaving, and so

913
00:50:07,280 --> 00:50:09,840
Speaker 1: management teams are being held to account. They're being forced

914
00:50:09,920 --> 00:50:13,200
Speaker 1: to where they're trading at too high of the cost

915
00:50:13,239 --> 00:50:16,400
Speaker 1: of capital, to return that capital um and not to

916
00:50:17,400 --> 00:50:21,719
Speaker 1: over invest and grow production uneconomically. And so yeah, I

917
00:50:21,719 --> 00:50:24,000
Speaker 1: think I think there's a good chance that you see

918
00:50:24,000 --> 00:50:27,880
Speaker 1: OPEC behave similarly, and it's it's less about them trying

919
00:50:27,920 --> 00:50:30,640
Speaker 1: to spike the price and more about them trying to

920
00:50:31,480 --> 00:50:34,600
Speaker 1: balance the market, and if they see attempts at destroying

921
00:50:34,640 --> 00:50:40,360
Speaker 1: demand there, it's quite rational for them to preemptively proactively

922
00:50:40,880 --> 00:50:43,440
Speaker 1: cut supply in order to sort of match that, and

923
00:50:43,480 --> 00:50:47,040
Speaker 1: so we already saw that, especially with their limited capacity

924
00:50:47,160 --> 00:50:50,080
Speaker 1: to produce. If you can really only produce nine million

925
00:50:50,120 --> 00:50:53,040
Speaker 1: barrels a day comfortably in your Saudi Arabia, why on

926
00:50:53,120 --> 00:50:55,960
Speaker 1: earth would you produce ten. It just doesn't make any sense.

927
00:50:56,000 --> 00:50:57,799
Speaker 1: And we pointed that out. And you know, I might

928
00:50:57,840 --> 00:51:00,279
Speaker 1: be getting those numbers slightly off, but just direct. Really,

929
00:51:00,320 --> 00:51:03,520
Speaker 1: I think it's indicative and so lo and behold here

930
00:51:03,560 --> 00:51:06,080
Speaker 1: they are producing. I think they're down six hundred thousand

931
00:51:06,080 --> 00:51:08,759
Speaker 1: barrels a day month over month, and so um, I

932
00:51:08,760 --> 00:51:11,320
Speaker 1: wouldn't be surprised if they cut another foreigner thousand barrels

933
00:51:11,360 --> 00:51:13,439
Speaker 1: because they just don't want to produce that more. They'd

934
00:51:13,520 --> 00:51:16,200
Speaker 1: rather hold some in spare capacity or at least not

935
00:51:16,239 --> 00:51:19,920
Speaker 1: be overproducing from their fields. Similar for other parts of OPAC.

936
00:51:20,000 --> 00:51:25,279
Speaker 1: And also I think Russia, I think they're they're reinvesting intelligently,

937
00:51:25,320 --> 00:51:28,480
Speaker 1: and they're trying to limit their declines um while at

938
00:51:28,480 --> 00:51:31,960
Speaker 1: the same time limit their declines in their production capacity,

939
00:51:32,200 --> 00:51:36,120
Speaker 1: while at the same time allowing production that's hard to fight,

940
00:51:36,239 --> 00:51:38,920
Speaker 1: hard to keep on, allowing that to decline off to

941
00:51:39,000 --> 00:51:41,840
Speaker 1: some extent, and restricting some of their wells. So I

942
00:51:41,880 --> 00:51:44,000
Speaker 1: think I think this is sort of a natural process,

943
00:51:44,040 --> 00:51:47,600
Speaker 1: and I think uh Biden and other sort of G

944
00:51:47,719 --> 00:51:49,680
Speaker 1: seven leaders messed up on this. I think they just

945
00:51:49,719 --> 00:51:53,040
Speaker 1: didn't understand what was going on from a production and

946
00:51:53,200 --> 00:51:58,920
Speaker 1: field perspective that would make OPEC inclined to more proactively

947
00:51:59,000 --> 00:52:01,600
Speaker 1: cut production. So it's both economic like you were saying,

948
00:52:01,640 --> 00:52:05,480
Speaker 1: as well as there's this technical aspect that makes them

949
00:52:05,480 --> 00:52:08,000
Speaker 1: even more inclined to cut and makes them even more

950
00:52:08,000 --> 00:52:09,879
Speaker 1: inclined to cut from here. So even though they cut

951
00:52:10,040 --> 00:52:13,839
Speaker 1: quotas by two million pearls a day, there's still there's

952
00:52:13,840 --> 00:52:17,480
Speaker 1: still significant quota as well above their current production levels,

953
00:52:17,560 --> 00:52:22,279
Speaker 1: and I think those come down potentially with almost any

954
00:52:22,320 --> 00:52:25,200
Speaker 1: excuse over the next few months. Yeah. I mean, it's

955
00:52:25,239 --> 00:52:27,440
Speaker 1: just basic business sense. If you're selling something that you

956
00:52:27,520 --> 00:52:30,200
Speaker 1: have a limited supply of, you're gonna want to sell

957
00:52:30,280 --> 00:52:31,919
Speaker 1: it for the most amount of money that you can.

958
00:52:32,040 --> 00:52:35,400
Speaker 1: And I'd rather sell less of it for higher dollars

959
00:52:35,480 --> 00:52:37,200
Speaker 1: than sell it all out at a very low price

960
00:52:37,200 --> 00:52:39,600
Speaker 1: because it's a limited supply or fixed supply. So it

961
00:52:39,640 --> 00:52:42,040
Speaker 1: just kind of makes sense. Now if we if we

962
00:52:42,120 --> 00:52:44,480
Speaker 1: jump to then um, okay, so we've we've kind of

963
00:52:44,480 --> 00:52:46,360
Speaker 1: framed up the supply side, and the problem is that

964
00:52:46,400 --> 00:52:48,399
Speaker 1: we can't get a lot of new supply on without

965
00:52:48,440 --> 00:52:52,000
Speaker 1: a lot of capex and a long time perspective. And

966
00:52:52,080 --> 00:52:54,640
Speaker 1: that seems to be a problem. We hear Biden again.

967
00:52:54,719 --> 00:52:57,600
Speaker 1: We started out talking about this, I'm thinking this rhetoric

968
00:52:57,600 --> 00:53:01,160
Speaker 1: towards nationalization, but basically saying that the price of gas down,

969
00:53:01,280 --> 00:53:05,480
Speaker 1: you're greedy, you're you're too many profits, etcetera, etcetera. Um.

970
00:53:05,520 --> 00:53:08,280
Speaker 1: But then you know, we're seeing that these oil companies

971
00:53:08,280 --> 00:53:11,040
Speaker 1: and specifically when the gas prices the refinery saying, look,

972
00:53:11,040 --> 00:53:13,239
Speaker 1: we're not going to invest more money. It takes us

973
00:53:13,239 --> 00:53:15,759
Speaker 1: fifteen twenty years to make our money. Why would we

974
00:53:15,800 --> 00:53:17,760
Speaker 1: invest that when you say you're going to shut us down, etcetera.

975
00:53:17,800 --> 00:53:19,239
Speaker 1: And so we kind of have this E s G

976
00:53:19,440 --> 00:53:23,200
Speaker 1: attack now, and E s G attack is limiting that

977
00:53:23,320 --> 00:53:25,640
Speaker 1: and my opinion seems to be limiting the amount of

978
00:53:25,640 --> 00:53:28,680
Speaker 1: the ability or the want to reinvest that money because

979
00:53:28,719 --> 00:53:32,520
Speaker 1: of that long term perspective. We don't have that. Um.

980
00:53:32,560 --> 00:53:34,960
Speaker 1: It seems like that's been a very big problem. I mean,

981
00:53:35,000 --> 00:53:36,879
Speaker 1: Biden came in saying he wants to shut them down.

982
00:53:38,760 --> 00:53:41,760
Speaker 1: Maybe the E s G narrative seems to be starting

983
00:53:41,800 --> 00:53:46,960
Speaker 1: to fall apart. Maybe that's my optimistic my optimism bias

984
00:53:46,960 --> 00:53:50,120
Speaker 1: showing where do you think E s G fits into

985
00:53:50,160 --> 00:53:53,040
Speaker 1: this and what does that mean for energy prices over

986
00:53:53,040 --> 00:53:55,920
Speaker 1: the next couple of years. So there's one thing you

987
00:53:55,960 --> 00:53:58,440
Speaker 1: said in there that I think is actually, uh, I

988
00:53:58,440 --> 00:54:00,200
Speaker 1: don't know. I would think that E s G would

989
00:54:00,239 --> 00:54:02,919
Speaker 1: go away to some extent just because it's so uneconomic

990
00:54:03,080 --> 00:54:06,200
Speaker 1: and it's restricting investment that's necessary to start the clock

991
00:54:06,600 --> 00:54:09,800
Speaker 1: to be able to get the world oil market sufficiently supplied.

992
00:54:10,000 --> 00:54:11,520
Speaker 1: But there's one thing in there they think is even

993
00:54:11,520 --> 00:54:14,239
Speaker 1: more interesting that's worth focusing on for a second. So

994
00:54:14,640 --> 00:54:19,120
Speaker 1: the world refining market is actually not undersupplied, and US

995
00:54:19,200 --> 00:54:22,759
Speaker 1: refiners are partly not investing because there are onerous environmental

996
00:54:22,840 --> 00:54:26,360
Speaker 1: rules and taxes, but they're also partly not investing because

997
00:54:26,560 --> 00:54:28,960
Speaker 1: there are giant refineries that have been built or in

998
00:54:29,000 --> 00:54:32,080
Speaker 1: the process of being built in various countries around the world,

999
00:54:32,280 --> 00:54:38,120
Speaker 1: and there's actually sufficient refining capacity. There's not sufficient transport capacity,

1000
00:54:38,120 --> 00:54:40,799
Speaker 1: and some of that refining capacities in Russia or other

1001
00:54:40,840 --> 00:54:44,160
Speaker 1: countries where there are trade limitations and other issues, but

1002
00:54:44,480 --> 00:54:49,400
Speaker 1: there's not it's not uneconomic to not reinvest in refining

1003
00:54:49,520 --> 00:54:52,400
Speaker 1: today when you look at it from a multi year

1004
00:54:52,480 --> 00:54:55,120
Speaker 1: perspective rather than from a short term perspective. And that

1005
00:54:55,160 --> 00:54:57,960
Speaker 1: matters a lot for oil because when you look at

1006
00:54:57,960 --> 00:55:00,480
Speaker 1: the net price people are actually paying for barrel to

1007
00:55:00,560 --> 00:55:04,400
Speaker 1: consume oil right now, it's not the eighty or ninety

1008
00:55:04,480 --> 00:55:06,919
Speaker 1: or whatever dollars that you're seeing on your screen right now.

1009
00:55:07,200 --> 00:55:09,360
Speaker 1: It's actually a hundred and fifty or a hundred and

1010
00:55:09,360 --> 00:55:11,480
Speaker 1: eighty dollars a barrel, which is sort of if you

1011
00:55:11,520 --> 00:55:14,799
Speaker 1: look at your gasoline price, your diesel price at the

1012
00:55:14,800 --> 00:55:17,400
Speaker 1: gas station, I mean that the price is much higher

1013
00:55:17,440 --> 00:55:20,040
Speaker 1: that people are paying. And there's always some amount of

1014
00:55:20,200 --> 00:55:23,319
Speaker 1: profit for the gas stations and for the transportation and

1015
00:55:23,360 --> 00:55:26,920
Speaker 1: so on, but the net price is quite high. And

1016
00:55:27,000 --> 00:55:32,200
Speaker 1: so as refining capacity comes on and as refined products

1017
00:55:32,200 --> 00:55:36,000
Speaker 1: are delivered, more oil is being used. And so we

1018
00:55:36,040 --> 00:55:39,359
Speaker 1: saw China, for example, their their refinery intake is much

1019
00:55:39,400 --> 00:55:41,520
Speaker 1: higher right now than it was two months ago. So

1020
00:55:41,640 --> 00:55:46,480
Speaker 1: as more oil is used to refine um to get

1021
00:55:46,520 --> 00:55:49,320
Speaker 1: refined products to deliver them, I think there's a decent

1022
00:55:49,400 --> 00:55:52,320
Speaker 1: chance that you see a shift in price from higher

1023
00:55:52,360 --> 00:55:55,320
Speaker 1: price on refined product, higher margin and refined product to

1024
00:55:55,480 --> 00:55:58,319
Speaker 1: higher margin and essentially higher price on oil because we're

1025
00:55:58,320 --> 00:56:01,400
Speaker 1: seeing all the current demand for oil products at this

1026
00:56:01,560 --> 00:56:04,719
Speaker 1: essentially let's say one fifth year, one eighty dollar per

1027
00:56:04,760 --> 00:56:08,359
Speaker 1: barrel price for oil, So the refinery margins go from

1028
00:56:08,400 --> 00:56:10,960
Speaker 1: let's say fifty dollars a barrel to twenty. There's a

1029
00:56:11,000 --> 00:56:13,880
Speaker 1: reasonable chance that you see that thirty dollar of barrel

1030
00:56:14,080 --> 00:56:18,520
Speaker 1: uplift seen on oil, especially because it's getting cleared through

1031
00:56:18,560 --> 00:56:22,920
Speaker 1: refineries hitting higher utilization levels. So again I know that

1032
00:56:23,000 --> 00:56:26,360
Speaker 1: sounds a little weird, but basically high refining margins today

1033
00:56:27,000 --> 00:56:30,800
Speaker 1: I think lead to higher oil prices tomorrow, not necessarily

1034
00:56:30,880 --> 00:56:36,239
Speaker 1: higher refining margins tomorrow. Mm hmm. So we have enough

1035
00:56:36,280 --> 00:56:40,279
Speaker 1: refining capacity, but it's in countries like Rush, our other

1036
00:56:40,520 --> 00:56:42,920
Speaker 1: unfriendly countries that we can't really use. So technically we

1037
00:56:42,960 --> 00:56:47,400
Speaker 1: don't have the refining capacity we again from a world perspective,

1038
00:56:47,440 --> 00:56:50,400
Speaker 1: we do, and um, you know, I think China's refining

1039
00:56:50,440 --> 00:56:53,839
Speaker 1: capacity at one point earlier this year was down three

1040
00:56:53,880 --> 00:56:56,759
Speaker 1: million barrels a day as they turned off their teapots

1041
00:56:56,760 --> 00:56:59,759
Speaker 1: and as they turned off so there are smaller independent facilities,

1042
00:56:59,800 --> 00:57:02,520
Speaker 1: and as they lowered their quotas for even their large

1043
00:57:02,520 --> 00:57:06,240
Speaker 1: refineries so as those come back on those directly affected

1044
00:57:06,239 --> 00:57:09,319
Speaker 1: the oil market, and that helps them locally as well

1045
00:57:09,360 --> 00:57:12,200
Speaker 1: as it helps their their exports. And the same is

1046
00:57:12,239 --> 00:57:15,600
Speaker 1: true in various other countries. There's a large project going on.

1047
00:57:16,240 --> 00:57:18,040
Speaker 1: I think it's in Saudi Arabia, but it might be

1048
00:57:18,080 --> 00:57:20,960
Speaker 1: in one of the other Gulf countries to bring on

1049
00:57:21,040 --> 00:57:24,520
Speaker 1: substantially more refining capacity there as well. And I think

1050
00:57:24,520 --> 00:57:27,600
Speaker 1: there's a few other projects. We did a short study

1051
00:57:27,640 --> 00:57:29,640
Speaker 1: on it, realized it wasn't that interesting as a white

1052
00:57:29,680 --> 00:57:32,440
Speaker 1: paper and didn't publish it. But um, you know, there

1053
00:57:32,800 --> 00:57:35,640
Speaker 1: is enough capacity. It's not just in Russia, and so

1054
00:57:35,760 --> 00:57:37,920
Speaker 1: I think, uh, I think it's You actually see it

1055
00:57:37,920 --> 00:57:42,160
Speaker 1: in the refiner equities where people sort of shout that

1056
00:57:42,200 --> 00:57:44,439
Speaker 1: the refiner equities are too cheap, but then you look

1057
00:57:44,480 --> 00:57:46,800
Speaker 1: at the likely earnings for them over a multi year

1058
00:57:46,800 --> 00:57:49,320
Speaker 1: period and they're fine. I mean, they're a little cheaper

1059
00:57:49,360 --> 00:57:52,320
Speaker 1: than they were, But it makes sense when you look

1060
00:57:52,360 --> 00:57:54,320
Speaker 1: at it in terms of if you were thinking about

1061
00:57:54,400 --> 00:57:57,600
Speaker 1: building a new refinery that the numbers don't they don't

1062
00:57:57,640 --> 00:58:00,480
Speaker 1: tie to, they don't make sense to try to go

1063
00:58:00,560 --> 00:58:04,480
Speaker 1: build with current owners regulations in taxas to try to

1064
00:58:04,480 --> 00:58:06,840
Speaker 1: build a new refinery, even if you get it approved

1065
00:58:06,880 --> 00:58:10,520
Speaker 1: on the Gulf coast when you consider the international project,

1066
00:58:10,640 --> 00:58:12,760
Speaker 1: so again there's there's a lot of sort of political

1067
00:58:12,800 --> 00:58:15,920
Speaker 1: discussion around that, and you know, the politics are certainly

1068
00:58:16,000 --> 00:58:19,440
Speaker 1: not helping. But there's a whole other economic aspect, and

1069
00:58:19,480 --> 00:58:24,600
Speaker 1: that's relevant because it matters for world oil demand, where

1070
00:58:24,640 --> 00:58:28,800
Speaker 1: demand is actually probably higher and probably less price sensitive

1071
00:58:28,840 --> 00:58:32,080
Speaker 1: than people think. And that's sort of being obscured by

1072
00:58:32,240 --> 00:58:35,160
Speaker 1: a number of refineries having been offline, including I mean

1073
00:58:35,200 --> 00:58:37,720
Speaker 1: there's refineries in the US that are off because there

1074
00:58:37,720 --> 00:58:41,000
Speaker 1: were explosions or fires, and as those ramp back on,

1075
00:58:41,240 --> 00:58:45,920
Speaker 1: you could see considerable additional demand for oil in the

1076
00:58:46,000 --> 00:58:50,160
Speaker 1: US just as those refineries start consuming more. It's certainly

1077
00:58:50,160 --> 00:58:53,400
Speaker 1: a messy situation. You know, now they're running at max capacity,

1078
00:58:53,520 --> 00:58:56,080
Speaker 1: so now maybe there's more accidents happening. They don't have

1079
00:58:56,080 --> 00:58:59,240
Speaker 1: the time for the maintenance required. In California where I'm at,

1080
00:58:59,440 --> 00:59:01,880
Speaker 1: they've shut down several refineries, and now we don't have

1081
00:59:02,000 --> 00:59:04,280
Speaker 1: enough refineries because they've shut them down, and we require

1082
00:59:04,280 --> 00:59:07,720
Speaker 1: a different blend of gasoline because VPA regulations and whatnot.

1083
00:59:07,760 --> 00:59:11,400
Speaker 1: Plus and so there's all these little different markets and

1084
00:59:11,440 --> 00:59:14,200
Speaker 1: stuff that that are within that. One more thing I

1085
00:59:14,280 --> 00:59:16,160
Speaker 1: want to jump on, and we'll talk about this one

1086
00:59:16,200 --> 00:59:20,000
Speaker 1: just quickly. But natural gas, and now natural gas in

1087
00:59:20,040 --> 00:59:22,320
Speaker 1: the United States has been sort of like this byproduct

1088
00:59:22,360 --> 00:59:24,280
Speaker 1: of the shell revolution that we've had in the last

1089
00:59:24,320 --> 00:59:28,560
Speaker 1: you know whatever twelve years or so. UM. And basically

1090
00:59:28,840 --> 00:59:30,959
Speaker 1: I mean still even today, I believe it's just being

1091
00:59:31,000 --> 00:59:33,600
Speaker 1: flared off and vented and not even being captured. It's

1092
00:59:33,600 --> 00:59:35,600
Speaker 1: a lot less today than it was, but we had

1093
00:59:35,640 --> 00:59:40,560
Speaker 1: it so cheap, um. But now we've been trying to

1094
00:59:40,640 --> 00:59:42,920
Speaker 1: export more. So we see the price of natural gas

1095
00:59:43,040 --> 00:59:45,280
Speaker 1: United States versus the global price of natural gas is

1096
00:59:45,320 --> 00:59:47,520
Speaker 1: a massive difference. And I don't know where it's at today,

1097
00:59:47,560 --> 00:59:50,920
Speaker 1: but um, somewhere what's six and thirty five or I

1098
00:59:50,960 --> 00:59:53,080
Speaker 1: don't know, four and thirty five, something like that, whatever

1099
00:59:53,080 --> 00:59:56,120
Speaker 1: it is. UM. As we start exporting more natural gas,

1100
00:59:56,160 --> 00:59:58,600
Speaker 1: supposedly we're trying to help offset what's been lost over

1101
00:59:58,600 --> 01:00:02,120
Speaker 1: in Europe, etcetera. UM, do you think over the next

1102
01:00:02,160 --> 01:00:04,320
Speaker 1: couple of years or how longever you think it's going

1103
01:00:04,360 --> 01:00:07,040
Speaker 1: to take if if we export enough natural gas, does

1104
01:00:07,280 --> 01:00:10,280
Speaker 1: it reset the US natural gas price to the global

1105
01:00:10,360 --> 01:00:12,560
Speaker 1: natural gas price? And Americans might see the price of

1106
01:00:12,640 --> 01:00:16,120
Speaker 1: natural gas go from whatever six bucks to thirty five

1107
01:00:16,160 --> 01:00:20,440
Speaker 1: bucks or something. No, I think there have been some

1108
01:00:20,480 --> 01:00:24,200
Speaker 1: misconceptions around this. There's a huge difference in North America

1109
01:00:24,360 --> 01:00:28,080
Speaker 1: between natural gas and oil. UM. Oil is hard to produce,

1110
01:00:28,440 --> 01:00:32,160
Speaker 1: there's limited resource to produce it from, and the incremental

1111
01:00:32,240 --> 01:00:35,960
Speaker 1: cost on producing it is escalating dramatically. Uh. Natural gas

1112
01:00:36,000 --> 01:00:39,840
Speaker 1: is plentiful. UM. There are many many known resources that

1113
01:00:39,880 --> 01:00:43,840
Speaker 1: are highly economic. And let's say seven dollar natural gas UM.

1114
01:00:43,880 --> 01:00:46,240
Speaker 1: If it were to stay flat at seven dollars for

1115
01:00:46,280 --> 01:00:49,600
Speaker 1: a while and then as services cost rise, maybe that

1116
01:00:49,720 --> 01:00:53,080
Speaker 1: number goes to eight or maybe nine, But it's the

1117
01:00:53,120 --> 01:00:56,640
Speaker 1: equivalent of let's say three oil. So when you think

1118
01:00:56,680 --> 01:01:00,520
Speaker 1: about sort of what what that means relative to prices

1119
01:01:00,560 --> 01:01:03,240
Speaker 1: were in the US three years ago, I mean, there's

1120
01:01:03,280 --> 01:01:06,000
Speaker 1: just there's so much resource and and there there are

1121
01:01:06,000 --> 01:01:08,880
Speaker 1: limitations on services. But as you get to that higher

1122
01:01:09,000 --> 01:01:11,120
Speaker 1: end for natural gas prices in the US, you just

1123
01:01:11,240 --> 01:01:14,640
Speaker 1: you open up so much resource. UM. I mean just

1124
01:01:14,680 --> 01:01:17,000
Speaker 1: in the you know, you think about Oklahoma and all

1125
01:01:17,040 --> 01:01:19,680
Speaker 1: these different natural gas plays that were discovered and all

1126
01:01:19,720 --> 01:01:21,920
Speaker 1: this different rock that people know is there. They have

1127
01:01:22,000 --> 01:01:24,800
Speaker 1: the infrastructure built out, and there's really like half cycle

1128
01:01:24,880 --> 01:01:27,880
Speaker 1: or quarter cycle economics to actually go develop it. So no,

1129
01:01:28,000 --> 01:01:31,160
Speaker 1: I think I think you need to build way more

1130
01:01:31,280 --> 01:01:33,960
Speaker 1: l en G exports than are being built or likely

1131
01:01:33,960 --> 01:01:38,000
Speaker 1: to be built, along with dramatically reindustrializing the U S,

1132
01:01:38,040 --> 01:01:40,880
Speaker 1: which isn't happening to the scale that you need, along

1133
01:01:40,880 --> 01:01:44,080
Speaker 1: with reindustrializing Mexico, which is happening and it's very exciting,

1134
01:01:44,560 --> 01:01:47,440
Speaker 1: uh for that country and for the people there. Um.

1135
01:01:47,480 --> 01:01:49,760
Speaker 1: But even with all of that, I think it's extremely

1136
01:01:49,800 --> 01:01:52,840
Speaker 1: unlikely you could see days or even months with really

1137
01:01:52,920 --> 01:01:56,040
Speaker 1: high prices for natural gas if there's extreme weather other

1138
01:01:56,080 --> 01:01:58,640
Speaker 1: sorts of supply disruptions. But now I think, I think

1139
01:01:58,680 --> 01:02:01,720
Speaker 1: that's a super un likely scenario. And I think it's

1140
01:02:01,720 --> 01:02:03,840
Speaker 1: easy to get sort of caught up in excitement in

1141
01:02:03,920 --> 01:02:07,160
Speaker 1: various things, and so I think it's it's a very

1142
01:02:07,200 --> 01:02:11,720
Speaker 1: important point to distinguish the dynamic for natural gas prices

1143
01:02:11,760 --> 01:02:15,600
Speaker 1: in North America versus um versus the price for oil,

1144
01:02:15,640 --> 01:02:18,760
Speaker 1: and the likely dynamic for those two. Got it? Got it? Okay,

1145
01:02:18,760 --> 01:02:22,760
Speaker 1: Thanks for addressing that all right, last topic, um, and

1146
01:02:22,840 --> 01:02:25,320
Speaker 1: again to reiterate your disclaimer and you can say it

1147
01:02:25,320 --> 01:02:27,240
Speaker 1: again as well, but this is non investment advice. And

1148
01:02:27,280 --> 01:02:29,400
Speaker 1: then you don't need to name any names. But for

1149
01:02:29,440 --> 01:02:31,919
Speaker 1: somebody who's interested in this and says, okay, I see

1150
01:02:31,920 --> 01:02:35,360
Speaker 1: this apply demand, UM equilibrium is off. I think this

1151
01:02:35,480 --> 01:02:40,600
Speaker 1: is a good investment. UM. You mentioned equities many times, UM,

1152
01:02:40,640 --> 01:02:43,160
Speaker 1: I mean do you like? UM? You like equity type

1153
01:02:43,160 --> 01:02:45,400
Speaker 1: plays you like? I mean you do like a factor

1154
01:02:45,440 --> 01:02:48,960
Speaker 1: of service companies, actual oil itself, futures, et cetera. Like

1155
01:02:48,960 --> 01:02:53,000
Speaker 1: where do you look for gems or bargains or UM ideas?

1156
01:02:53,000 --> 01:02:55,560
Speaker 1: I guess yeah, I think it's a good question. Right,

1157
01:02:55,560 --> 01:02:58,000
Speaker 1: So if you have an idea which is UH, and

1158
01:02:58,000 --> 01:03:00,320
Speaker 1: you're able to analyze it, so you see that the

1159
01:03:00,400 --> 01:03:03,640
Speaker 1: world oil markets undersupplied, and you see demand is likely

1160
01:03:03,680 --> 01:03:06,920
Speaker 1: to rise over the medium to long term, and so

1161
01:03:07,520 --> 01:03:10,440
Speaker 1: you're interested. You see that the price is probably disconnected

1162
01:03:10,480 --> 01:03:14,000
Speaker 1: from the fundamentals. There's a strategic petroleum reserve release that's

1163
01:03:14,000 --> 01:03:17,520
Speaker 1: been happening that's inherently temporary because there's a limited amount

1164
01:03:17,520 --> 01:03:20,880
Speaker 1: of oil there that can be released, and you see

1165
01:03:20,920 --> 01:03:23,160
Speaker 1: there's not enough investment. So so I think that's a

1166
01:03:23,240 --> 01:03:27,480
Speaker 1: it's an interesting starting point. UM. I'm more focused on

1167
01:03:27,720 --> 01:03:30,520
Speaker 1: the oil and gas producer equities and to a lesser

1168
01:03:30,520 --> 01:03:34,360
Speaker 1: extent the services companies. UH. I'm interested in the smaller

1169
01:03:34,400 --> 01:03:38,200
Speaker 1: cap ones because um I think in general, when you

1170
01:03:38,240 --> 01:03:41,640
Speaker 1: look at the history of oil and gas, you see

1171
01:03:41,760 --> 01:03:45,040
Speaker 1: the producers and the services companies trade at much higher

1172
01:03:45,080 --> 01:03:50,160
Speaker 1: valuations over time in up markets, so in situations where

1173
01:03:50,160 --> 01:03:54,240
Speaker 1: the oil UH supply is insufficient and likely to be

1174
01:03:54,440 --> 01:03:57,200
Speaker 1: more insufficient. Um. So you look at the nineties seventies,

1175
01:03:57,280 --> 01:03:59,520
Speaker 1: you look at other periods that may be similar to

1176
01:03:59,560 --> 01:04:03,840
Speaker 1: what we're experiencing today, and producer equities did very well,

1177
01:04:03,840 --> 01:04:07,280
Speaker 1: oil services equities did very well. And then what I've

1178
01:04:07,320 --> 01:04:10,480
Speaker 1: noticed is that the small cap producers are trading at

1179
01:04:10,680 --> 01:04:14,120
Speaker 1: huge discounts to the larger caps. So if the typical

1180
01:04:14,280 --> 01:04:16,840
Speaker 1: let's say, MidCap producer that you might have heard of

1181
01:04:16,920 --> 01:04:21,000
Speaker 1: might trade it let's say six times EBITDA or cash flow, UH,

1182
01:04:21,040 --> 01:04:23,560
Speaker 1: you might see a small producer trade at let's say

1183
01:04:23,840 --> 01:04:27,120
Speaker 1: two or three times EBITDA. Using the same assumptions on

1184
01:04:27,560 --> 01:04:30,560
Speaker 1: oil price and natural gas price, and the same assumptions

1185
01:04:30,600 --> 01:04:34,480
Speaker 1: on services costs and the services side, same sort of

1186
01:04:34,560 --> 01:04:38,080
Speaker 1: idea where you can buy services companies that are equipment

1187
01:04:38,080 --> 01:04:41,800
Speaker 1: intensive at a fraction of the replacement cost. Frankly, you

1188
01:04:41,840 --> 01:04:44,240
Speaker 1: can buy some oil fields at the at a fraction

1189
01:04:44,240 --> 01:04:46,600
Speaker 1: of the replacement costs too. That's one of the measures

1190
01:04:46,600 --> 01:04:48,480
Speaker 1: I used to figure out if these things are actually

1191
01:04:48,560 --> 01:04:54,120
Speaker 1: cheaper or not. And historically, buying services UH companies like

1192
01:04:54,200 --> 01:04:57,360
Speaker 1: drilling rigs or pressure pumping or so on, UM into

1193
01:04:57,440 --> 01:05:00,000
Speaker 1: a recovery if you buy them at a big discount

1194
01:05:00,000 --> 01:05:02,880
Speaker 1: out to their book value or replacement cost and then

1195
01:05:02,960 --> 01:05:06,080
Speaker 1: wait until they start earning a lot of money. UH

1196
01:05:06,120 --> 01:05:08,640
Speaker 1: that they might still look cheap on a cash flow basis,

1197
01:05:08,680 --> 01:05:11,600
Speaker 1: but historically that trade has been one of the most

1198
01:05:11,640 --> 01:05:16,040
Speaker 1: profitable and consistent trades in history for oil and gas

1199
01:05:16,040 --> 01:05:19,600
Speaker 1: equities and frankly for the broader UH stock market. Finding

1200
01:05:19,600 --> 01:05:21,880
Speaker 1: those sorts of things so historically have done very well,

1201
01:05:22,240 --> 01:05:23,880
Speaker 1: then those are sort of the two areas I think

1202
01:05:23,880 --> 01:05:27,280
Speaker 1: are really interesting, and just one one extra sort of

1203
01:05:27,320 --> 01:05:31,320
Speaker 1: aspect of that I think UM low decline oil producers

1204
01:05:31,840 --> 01:05:34,040
Speaker 1: UM in the public market as well as some of

1205
01:05:34,040 --> 01:05:38,440
Speaker 1: the smaller private assets UM. The market doesn't seem to

1206
01:05:38,440 --> 01:05:41,360
Speaker 1: have caught up with the fact that services costs are

1207
01:05:41,440 --> 01:05:44,640
Speaker 1: rising a lot, So there are low declined producers that

1208
01:05:44,720 --> 01:05:49,000
Speaker 1: trade actually at a large discount to high decline producers UM.

1209
01:05:49,320 --> 01:05:52,960
Speaker 1: Because they're small because people don't understand them, and those

1210
01:05:53,000 --> 01:05:55,760
Speaker 1: are very interesting because if you're a low decline producer,

1211
01:05:55,960 --> 01:05:58,680
Speaker 1: let's say your production might only decline ten percent a

1212
01:05:58,760 --> 01:06:01,760
Speaker 1: year if you didn't reinvest, versus a shale producer, maybe

1213
01:06:01,800 --> 01:06:04,400
Speaker 1: your production would decline thirty or forty pc a year

1214
01:06:04,400 --> 01:06:08,000
Speaker 1: if you don't invest. And so that matters because if

1215
01:06:08,000 --> 01:06:10,479
Speaker 1: it costs twice as much to use a drilling rig

1216
01:06:10,520 --> 01:06:13,480
Speaker 1: next year as it does this year, because service costs

1217
01:06:13,480 --> 01:06:16,600
Speaker 1: are higher and labor costs are higher and so on. Um,

1218
01:06:16,640 --> 01:06:19,080
Speaker 1: if it costs twice as much, you only need to

1219
01:06:19,120 --> 01:06:22,480
Speaker 1: reinvest let's say ten or twenty percent of what you're making.

1220
01:06:22,840 --> 01:06:25,280
Speaker 1: So if you if the cost doubles, maybe now you're

1221
01:06:25,280 --> 01:06:29,600
Speaker 1: reinvesting twenty or if you're a company that's reinvesting fifty

1222
01:06:29,720 --> 01:06:32,200
Speaker 1: or eighty percent of what you're making to be able

1223
01:06:32,200 --> 01:06:35,120
Speaker 1: to keep your production flat because your declinates are so high,

1224
01:06:35,320 --> 01:06:39,080
Speaker 1: if services cost double, then maybe you have to stop

1225
01:06:39,120 --> 01:06:42,480
Speaker 1: reinvesting because it's not economic to do so. So that's

1226
01:06:42,520 --> 01:06:45,160
Speaker 1: part of the equation of why oil prices probably need

1227
01:06:45,200 --> 01:06:47,800
Speaker 1: to go a lot higher. But it's also I think

1228
01:06:47,840 --> 01:06:51,200
Speaker 1: there's a big advantage in being able to analyze these

1229
01:06:51,240 --> 01:06:54,720
Speaker 1: companies and see sort of which ones are advantaged in

1230
01:06:54,720 --> 01:06:58,040
Speaker 1: this situation and which ones even if oil prices go higher,

1231
01:06:58,280 --> 01:07:01,560
Speaker 1: maybe don't win so much, either because their valuations are

1232
01:07:01,640 --> 01:07:05,760
Speaker 1: high and or because they're too service intensive and the

1233
01:07:05,840 --> 01:07:08,760
Speaker 1: inflation the experience might be higher than the price inflation

1234
01:07:08,800 --> 01:07:13,000
Speaker 1: they benefit from on the product they sell. Alright, alright, good,

1235
01:07:13,120 --> 01:07:16,160
Speaker 1: good info, good good place to start to go dig

1236
01:07:16,160 --> 01:07:18,800
Speaker 1: out some gems for yourself. If you believe in the

1237
01:07:18,920 --> 01:07:21,520
Speaker 1: energy thesis as I do, and obviously as Josh does,

1238
01:07:21,800 --> 01:07:23,959
Speaker 1: I think we'll go ahead and wrap it up with that.

1239
01:07:23,960 --> 01:07:25,680
Speaker 1: That was a lot of information. I had more questions

1240
01:07:25,720 --> 01:07:28,400
Speaker 1: I want to ask, but we'll, we'll, we'll, we'll, We'll

1241
01:07:28,400 --> 01:07:33,400
Speaker 1: wrap it up there. Um at Josh Underscore Young Underscore

1242
01:07:33,480 --> 01:07:35,360
Speaker 1: one is your Twitter handle. You put out a lot

1243
01:07:35,400 --> 01:07:37,360
Speaker 1: of good information, so if you're interested in energy, you

1244
01:07:37,360 --> 01:07:40,120
Speaker 1: should definitely follow him on Twitter at Josh Underscore Young

1245
01:07:40,200 --> 01:07:43,240
Speaker 1: Underscore one and check out Bison Interest dot com is

1246
01:07:43,280 --> 01:07:46,360
Speaker 1: his website um which has a really cool story of

1247
01:07:46,400 --> 01:07:48,440
Speaker 1: the bison. By the way, why you chose the bison

1248
01:07:48,520 --> 01:07:51,520
Speaker 1: name and uh, everyone should go just check out the

1249
01:07:51,520 --> 01:07:53,600
Speaker 1: website just to at least read the story. On the Bison.

1250
01:07:53,640 --> 01:07:56,080
Speaker 1: I didn't know that piece. Um, maybe it's stuck out

1251
01:07:56,080 --> 01:07:58,680
Speaker 1: to me because we're watching that show, what is the

1252
01:07:58,760 --> 01:08:01,480
Speaker 1: eighteen sixty three or whatever. It's like the prequel to

1253
01:08:01,560 --> 01:08:05,440
Speaker 1: the Yellowstone or whatever, and uh they had this, Uh

1254
01:08:05,720 --> 01:08:08,920
Speaker 1: tornado came through and all the animals started screening, and

1255
01:08:08,920 --> 01:08:10,080
Speaker 1: so it kind of made me think of that. So

1256
01:08:10,600 --> 01:08:12,760
Speaker 1: go go check bison interest dot com and read the

1257
01:08:12,760 --> 01:08:15,160
Speaker 1: story on the bison at least anything else you want

1258
01:08:15,160 --> 01:08:18,320
Speaker 1: to shout out, Josh. Nope, I really appreciate you having

1259
01:08:18,320 --> 01:08:20,759
Speaker 1: me on Mark. This is great. Okay, I appreciate it.

1260
01:08:20,840 --> 01:08:22,360
Speaker 1: All right. We'll wrap it up with that. Thanks so much.

1261
01:08:23,160 --> 01:08:25,080
Speaker 1: All right, that's a rap. Hopefully you learned a lot

1262
01:08:25,120 --> 01:08:27,200
Speaker 1: with this interview that I did with Josh Young. Give

1263
01:08:27,280 --> 01:08:29,400
Speaker 1: him a follow. We have everything linked down below so

1264
01:08:29,439 --> 01:08:31,800
Speaker 1: you can learn more about what he's doing. It's a

1265
01:08:31,800 --> 01:08:34,519
Speaker 1: big trend and it's only going to get bigger. It's

1266
01:08:34,560 --> 01:08:36,960
Speaker 1: something that I am positioned in right now, and I

1267
01:08:36,960 --> 01:08:39,280
Speaker 1: think you should as well. All Right, to your success.

1268
01:08:39,600 --> 01:08:40,000
Speaker 1: I'm out